If the family income is from self-employment, investment, real estate, or any form of a family owned or partially owned business (corporation, partnership, limited company, etc.) the number that a family thinks is their “income” may have absolutely no relation to what an educational institution thinks their income is when calculating financial aid.
Here is one example: let’s say a family owns all (or a portion) of a building through a trust and a limited partnership in which a family member is the general partner. The property generates income in excess of expenses so that it is cash flow positive, but depreciation makes it a net loss for tax purposes, and the family trust refinanced the mortgage in excess of the previous mortgage and pocketed the extra cash, which isn’t income, because taking out a loan isn’t income, and then they deduct the interest paid on the loan turning that profitable building that put a ton of non-taxable cash in their pockets into a tax deductible “loss.” That is one way to put big bucks in the family pockets, but show no or “low” income.
Should they get fin aid because the tax return shows moderate income? Or will the fin aid office drill down through the numbers and decide the family is loaded and there is no “need” to be met?
I’m not saying that is the case here, but there are dozens of ways the numbers can work out so that a family showing moderate taxable “income” on a return could have vastly more money available.