If you fill out this form you will have a rough idea about your business asset:
https://college.harvard.edu/sites/default/files/BusinessFarm%20Supplement_0.pdf
And most colleges will require you to submit this form. Basically, everything you own in your business has to be reported.
Some colleges require to report the year/model and the price of your personal cars too.
@Thumper1 - Thank you for all the info. I think you may not understand the structure of our business, however. Because we are a sole proprietorship everything is consider income. There is no difference between personal income and business income. All profit from our business is considered income regardless of whether we withdraw it from the business account or not. There is no hiding personal income in the business account because every single cent we make, no matter where it lives, is reported to the IRS. We, in fact, are not even required to have a business account, but we need it because we have a DBA.
The main question I asked was answered by @mom2collegekids “The savings in the business would get counted. Yes, it gets counted as income, and while it sits in the bank, it gets counted as an asset…on the day you file FAFSA and CSS.” This is my main concern at this time. We need to make purchases. This changes our thinking.
I also thank the person who contacted me privately and gave me a similar answer.
What has become increasingly clear, to me, and hopefully anyone else who might be reading this post in the future, is that having a sole proprietorship may be extremely problematic. The business needs to be switched to another structure where profit and income are not one and the same and where we withdraw a salary that can then be used to calculate income for tuition purposes. I have been thinking about changing us over to an S-corporation for several years and now I am kicking myself because I did not when I had the chance. If I do it now, it might make future years better but it wont help next year when my son applies. All business profit becomes income, even profit that we put back into the business and have no intention of using outside of the business.
@coolweather Thanks for the link. I will check that out.
@lknomad, you are not understanding that @Thumper1 is asking you about Schedule C gross income (line 7) as compared to Schedule C net profit (line 31) which flows to page 1 of Form 1040.
Various items of expense on Schedule C may end up being added back for financial aid purposes (such as Sec 179 and depreciation expense).
@madison85. Thumper keeps on accusing me of hiding assets and it is getting very frustrating. Thumper has been accusing me from the moment I started this post and it is insulting.
It helps when people actually use line numbers on tax forms because then I know what they are taking about. I don’t have taxes in front of me right now but will take a look when I am at home.
I am not accusing you of hiding anything. What I’m saying is just what others have told you…your business money’s as you have your business structured are available as assets to the financial,aid folks.
You were the one wondering if keeping the money in your business accounts were still assets. Answer is…yes.
Anyway, that question has been answered as well as you now knowing about those deductions that might be added back as income.
You now should have some sense of where you stand in terms of need based aid. I will say, however, with business owners and private schools…it’s not always predictable.
Really, THE important number is how much you plan to pay annually for your child to attend college. That number is the single most important thing you need to determine. If you have a drop dead budget, communicate that to your kiddo. The student needs to understand that your net cost cannot exceed that amount. Then apply to,a varied list of schools, and see what happens. Just be very prepared to walk away from schools,where the money is not forthcoming…and therefore are unaffordable.
Thanks all luckily I have a very reasonable kid who understands the financial aspects. Unfortunately living in California with a kid who wants to leave nearer to home AND who wants a SLAC is difficult. Limited options. Our instate schools are wonderful and would not send us to the poor house but they are so very large. SLAC are limited by geography. We know he will have good choices but they may be tough. Being in the dark is really tough. Knowing that we really won’t know, at all, what we are looking at financially until next March or April is maddening. Also knowing that specific choices we make in business now could change his options later makes me feel like I should be doing something, anything, but I just done know what to do. I need a crystal ball.
Thanks again.
Would your kiddo consider Loyola Marymount? She might get merit aid there…but don’t know what your net costs would be.
What about Whittier?
What about the Cal States? They are so reasonably priced comparatively…and some are actually smaller sized.
My kid went to Loyola when he did CTY and was not thrilled - they used Loyola as their campus. I have actually asked him about it and he says no. I also think that any school that has religious undertones turns him off.
His safety is our local CSU - he has guaranteed admission due to an agreement between our public high schools and the CSU/CC. It has over 30,000 students though. I am also going to have him add NM Tech as a safety. I am from NM. It has a good track record of getting people to grad school, and through the WUE and with automatic merit aid it is very doable. If it looks like an option he can visit during admitted students day.
At least 2 UCs maybe one more, are on his list. We can afford those. UCI is a match. This is the fallback. Our high school sends students to UCLA and I think it is safe to say it is a match for his Stats and the school’s track record of acceptances. I am also going to have him look at UCSC. It is smaller.
Whittier is way below his stats - he has 800/800/700 on his SAT and 800s on two subject tests as well as a 4.0W/4.47UW. Whittier has SAT stats in the 400s. Yes he will probably get aid but he also might not get the rigor that he wants in a college. Its a fine line between aid and academic offerings.
His Stats put him in the running for top schools (although we all know that everything is a lottery these days). I am taking him to the Colleges that Changes Lives tour that is coming to our area in July, hoping to broaden his ideas and at least talk him into applying for other schools. My goal is to get some schools on his list, even if he is not thrilled at this time, that offer aid, so that he can have more choices next year should his top fall through financially or acceptance-wise. He can attend admitted student’s days for schools he does not know much about with the knowledge that a school wants him. It might change his outlook.
Likely would get an excellent guaranteed merit award from University of Alabama. Excellent. And it is not income or asset dependent.
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M. It has a good track record of getting people to grad school, and through the WUE and with automatic merit aid it is very doable.
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You may need to check on this. Many WUE schools will NOT give both WUE discount AND merit. I have only seen a few that do. Maybe UNM does, or not.
Thanks @mom2collegekids It doesn’t matter which discount. Both together or separate make it doable
@thumper1 I don’t think my kid would even consider Alabama. To far and too southern for him.
RE; NM Tech
It’s a great little school and a real bargain, but it’s a tech school, not a SLAC. It emphasis is on science and engineering. It doesn’t even offer any degrees in the traditional liberal arts or social sciences.
NM Tech doesn’t allow “double dipping” on scholarships.
The only exception to this is for New Mexico Lottery Scholarship. (Which is only available to New Mexico high school grads since the funding for that comes from the state government and not the college.)
Thanks @wayoutwestmom My kid will be a physical science or math major. He loves the local SLACs but is also looking into Harvey Mudd and Cal Tech. Size is very important for him. Smaller is better.
I don’t think that @thumper1 is accusing you of hiding assets. The issue of concern for you is how schools will view your business income, assets, and deductions
What are your son’s stats? What is his M+CR for his SAT? What is his GPA?
What STEM majors interest him? Math or ?
I know that your son wants a small school, but I hope he understands that there are pluses and minuses for large schools and for small schools.
Nearly all schools will have larger classes in the 100 level classes.
Smaller schools often have fewer profs so courses may have very limited time offerings. Often only one prof teaches a particular subject and if you don’t like that prof (or he has questionable reviews),. you’re still stuck taking him. Of course this can also sometimes happen at larger schools, but less likely.
Stats -
800M/800W/700R on his SAT- 1 sitting - Plans to retake in Oct to see if he can get that 700 to an 800
SAT Math 2 and Chem 800/800
GPA 4.0W/4.47UW
1 AP with a 5 - waiting on five more scores. Will graduate with a total of about 11 APs plus duel enrollment for Calc 2 and 3.
Right now he is interested in chemistry/math but he is taking physics next year and will wait and see how he likes it. Not interested in engineering or CS. Pure math or science.
His interest in small schools came after numerous tours.We have toured and attended info sessions for quite a few schools locally of all shapes and sizes. All the schools he is really interested in will have small class size. Waiting to tour the tech schools (Caltech and Harvey Mudd) in 2 weeks to see how he likes a school that has a tech emphasis rather than a liberal arts. That will let us know if NM tech is a good safety or not. If he likes the tech schools I will have him apply. If not then I wont.
He is an introvert that prefers someplace more intimate. He is not a club or sports type. He is in orchestra so that will continue in college - places like Pomona offer free music lessons! He has autism so the size matters more for living than for educational purposes. It will allow him to be more comfortable and able to function better. He does well in his 4000 person high school but not sure about the 30,000 campus.
Academically he will be fine no matter where he goes. It is socially that really matter more than anything else. The small highly academic institutions will allow him to thrive both academically and socially.
Suggestion: run net price calculators for several colleges using the income and asset estimates from your 1040 & Schedule C I suggested up thread. It may not be a bad as you think. Either way, it is worth checking.
For FAFSA-only colleges, you would not need to include a value for a small business, and that would include the business’ checking account balance – as long as your business checking account is in the name of the business (Joe’s Plumbing, or Joe Smith DBA Joe’s Plumbing) and kept separate from your personal account. (That’s good business practice anyway.) If you’re running everything from a combined family/business account right now, it would be good to separate it sooner rather than later. The federal student aid system does not care if the business is a sole proprietorship, C corp, S corp, LLC, or partnership, as long as the student’s family owns more than 50% of the business. (Family has a reasonably broad definition.) If you don’t meet the majority ownership requirement, you DO have to report the value of the business on FAFSA.
For Profile, you would report income the way Profile asks about it. When the Profile is being established, it will ask how many businesses are owned. If you say 1, it will then ask you a series of questions about that business based specifically on the type of tax return used to file the business income. Other than the question of how much is the business worth, most of the answers will come right from that tax return. I would not report the value of any checking account owned by the business in any question other than the specific question about the value of the business. Specifically, you do not want to double count the money and report it both as a parent asset and a business asset.
Thanks @arabrab we have two separate accounts and all business money lives in the business account. I will add the amounts together and see what pops up. I am afraid to look but I guess I will have to. When I used my tax forms to do the NPC for the state schools it went quite well. Once we have to add everything back in, well, who knows.
@arabrab I was going through my tax form and I have a question for you. The amount on line 12 of the 1040 is the profit/loss from the schedule C and becomes the total income, but the amounts on lines 24,25,27,28, 29, 32. which you said will be added to line 12 are actually removed from line 12 to make adjusted gross income. Why would a school add those back in when they have not been removed yet? Before they are removed they are already part of the total income. Did I read your post #16 incorrectly?
I assume that the total income would be line 12 (or line 22 if there is other income) plus lines 12, 13, & 30 from the schedule C.
Start with AGI, then add back those deductions for AGI (lines 24, 25, etc), then add back the Schedule C-referenced items.
Madison explained it better than I did.
Most business-related adjustments to income, as well as certain expenses on the Schedule C aren’t considered expenses from a financial aid standpoint, and they need to be added back in. (Yes, it is not fair, but it is what it is.)