A friend of mine has an online business which they started earlier in 2018 (I don’t know exactly when, but I don’t think they did had to pay any taxes for 2017). Recently, we were discussing filling out the FAFSA, and they mentioned that they were going to put off making it an LLC until after they did the FAFSA, and then try and update it later. At first I didn’t think anything of it, but then realized I read somewhere that if you made over $6750, you have to report it. They will DEFINITELY have made $6750 before the end of 2018. I don’t know exactly how much they made in the last few months, but I know a spike in profit was something that happened recently. I’m concerned that they’ll get in trouble for this somehow. What should happen here to avoid legal problems?
Income earned in 2018 won’t be used on financial aid documents until information is being reported for the 2020-2021 academic year (which will be no earlier than October 1st next year). In any event, it doesn’t matter if your friend is running the business as an LLC or not – student income needs to be reported at the proper time, no matter the amount or the type of business entity being used.
If these kiddos are self employed…isn’t their tax filing obligation >$400?
In any event…yes…income earned in 2018 needs to be reported on the 2020-2021 FAFSA…regardless of how or where it was earned…or how a business is structured.
Yes, I should have been more specific by saying that I’m talking about reporting student income on financial aid forms. OP needs to understand that the rules for reporting income on financial aid forms are not the same as the rules for filing an income tax return.