<p>My husband is self-employed in an S corp partnership with his brother. He receives a W-2 for his salary. He also receives compensation checks from the profits of the business. </p>
<p>My question revolves around the compensation he receives. His share of the business income in listed on line 17 of the 1040. The amount of the business income includes gross profit minus deductions. His compensation is one of the deductions from the income. Do we need to report his compensation on OTHER UNTAXED INCOME?</p>
<p>I hope I have explained this well enought for someone to understand.</p>
<p>If the deducted compensation here is his salary, then no, because it is taxed and reported on his W2 (and therefore line 7 on the 1040).</p>
<p>The profits and expenses flow through to the shareholders and how they get reported depends on the nature of the income. If it is from the net business income it goes on schedule E which will go to line 17 on the 1040, and be taxed there.</p>
<p>Note that you get taxed on the full amount of the business’s income regardless of whether you take a distribution or not (I assume that is what the “compensation checks” are).</p>
<p>So there is no untaxed income to report on FAFSA.</p>
<p>I have done a fair share of business taxes and I agree with notrichenough that you don’t have to report any non-taxed income because there is none.</p>
<p>The amount on line 17 should already include any distribution your husband received (compensation from profits as you put it).</p>
<p>I would agree with the other two replies. The W-2 income is reportable as wages, and the S-Corp income is reportable on Schedule E. BOTH of these items end up being included in your adjusted gross income, so there is no need to report it as untaxed income for Fafsa purposes.</p>