I have a question about the financial aid process:
Say a high school student runs a business making $20,000 in revenue every year, with $2,000 profit (18k in expenses). + Parents’ income combined is around $100,000.
What would be the household income that is considered in FAFSA? Would the student have to put the business under “assets/equity”? + Would this lower the amount of financial aid the student would get?
Thanks.
Its is the student business. Because the student is self employed…and makes more than the required amount, he MUST file his own income taxes. He will need to complete whatever the necessary forms are for business owners.
The student section of the fafsa will reflect the student income on his 2015 taxes. That is the year of taxes being used for the 2017-2018 financial aid forms.
Did you have this business in 2015?
Just an FYI…as a self employed business owner…you, the student, might very well be asked to show your expenses…some may very well be allowed as deductions for tax purposes but not for financial aid purposes.
@thumper1
Thanks for the reply.
No not in 2015.
But would it still be considered self employed if it’s an LLC (I’m partnered with 2 other co-owners, so I own 33%). So are you saying that the $20,000 would be added into the household income, rather than $2,000?
I am NOT saying that $20,000 would be added to your income.
If you didn’t own this in 2015, you have some time to figure this all out. 2015 is the tax year you will be using for the 2017-2018 fafsa.
@Madison85 how do LLC owners deal with their income etc on the financial aid forms.
I assume that the LLC member gets a Schedule K-1 with $2k of ordinary income 9n line 1 and then reports that on his 1040, so it’s in his/her AGI.
Hey @Madison85
The IRS website says that LLCs with multiple members file the 1065 Form, while LLCs with one individual files the 1040.
Would I need to file the Schedule K-1, if I’m also filing the 1065?
And you’re saying that the AGI would be parents income + my share of the profit from the LLC?
Your share of the profits from the LLC goes on your tax return. The income your parents earn goes on their tax return (or returns, if they are filing separately). Each tax return has its own AGI (adjusted gross income). The 1065 is a tax return for a business entity; it is not used to report income for individuals. Your income as an individual needs to be reported on a 1040 series return.
And on the financial aid forms, there is a section for PARENT financial info where your parent info will go…and a section for STUDENT financial info which is where YOUR info will go.
@helpabro a good CPA is worth the cost if you need a hand with business taxes. LLCs aren’t recognized business entities for federal taxation, so owners may elect to file as a partnership or corporation. That’s a decision you’ll want to make with your partners. If you choose to file a 1065 as a partnership, the business should send you (the owner) a K-1. You then file your own 1040 as an individual. But step one is making sure the business taxes are done properly.
Can you clarify this?
https://www.irs.gov/businesses/small-businesses-self-employed/limited-liability-company-llc
@Postmodern LLCs are state entities. That is why members must decide whether to file federal taxes as partners or as a corporation. This doesn’t mean that the IRS is unaware that they exist at the state level, just that theLLC, as an entity, has no relevance in terms of taxation. The relevant business entity is either a partnership or corporation. Single member LLCs are disregarded entities.