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FAFSA income reporting and K-1s

fallout87fallout87 3 replies3 threads New Member
we receive two K-1's on our 1040s - 1 from an LLC and one from an S Corp. Neither of them have income reported in the Box 14 indicated in the FAFSA instructions, so do we not report this on the application? income from the LLC is reported in Box 2 (Net rental real estate income) of form 1065, and the other is reported in Box 1 (Ordinary Business Income/Loss) of form Schedule K-1 (Form 1120-S). This last one is not Form 1065 at all, which is only K-1 form that guidance says to report income from. Advice? TIA.
edited October 17
6 replies
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Replies to: FAFSA income reporting and K-1s

  • kelsmomkelsmom 16435 replies99 threads Senior Member
    If the FAFSA instructions don’t not specifically ask for the information on your K-1, it is not reported.
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  • fallout87fallout87 3 replies3 threads New Member
    edited October 17
    Thank you for the reply @kelsmom. Anyone else concur?

    My concern in not reporting income from these K-1's, even though income is not in Box 14 of the K-1, is that it's the bulk of income that does get stated on our AGI (line 8b).

    So is it weird if that AGI number is one figure and then the income from work for each parent, reported separately in questions #86 & 87, does not add up to AGI and is significantly lower than AGI?

    I don't want to game the system, I just want to do it correctly. Obviously less income reported the better, but I also don't want it to seem like we're hiding anything when colleges compare FAFSA information and CSS Profile information, as I'm sure CSS will reflect all of our income.
    edited October 17
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  • kelsmomkelsmom 16435 replies99 threads Senior Member
    I am a retired financial aid director who has verified information on FAFSAs. The “bible” for this is the Federal Student Aid Handbook, and the relevant regulations are in the Application and Verification section: https://ifap.ed.gov/sites/default/files/attachments/2020-05/2021FSAHbkAVG.pdf. Search for Schedule K-1 to find information.
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  • politepersonpoliteperson 695 replies4 threads Member
    It isn’t unusual for AGI not to match sum of earnings from work. I can’t speak to the 1065 K1 but for an S Corp I don’t believe the K1 info is entered on the FAFSA as it has already passed through and is included on your 1040. However, you might need to do the css business supplement for some of the schools, and some might ask for the 1120s and 1065 as well.
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  • fallout87fallout87 3 replies3 threads New Member
    @kelsmom thank you for the 'bible'. it seems that this is the only reason they ask for separation of both parents' income:

    Employment expense allowance. Families with two working parents
    and one-parent families have extra expenses that must be considered, such as housekeeping services, transportation, clothing and
    upkeep, and meals away from home. This allowance recognizes those
    extra expenses. For two working parents, the allowance is 35% of the
    lesser of the first or second parent’s income earned from work (questions 86 and 87), but may not exceed $4,000. For one-parent families, the allowance is 35% of the parent’s income earned from work,
    also not to exceed $4,000. If a student’s parents are married and only
    one parent reports an income earned from work, the allowance is
    zero. The employment expense allowance is never less than zero.

    it seems they want to see that you're both working and be able to make an allowance for two parents working, so having a higher number here for both parents is beneficial, and the income reported by both of us is accounted for in AGI.

    Thanks!
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  • kelsmomkelsmom 16435 replies99 threads Senior Member
    I am glad to have helped.
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