I need someone that can explain to me what the Financial Aid office at my S’s dream school could not! Here’s our situation:
2 parents filing taxes jointly. 1 parent owns 5% share in an S Corp. Received 2017 paperwork: Schedule K-1 (Form 1120S). Box 1 says $371. This was reported on our joint tax return.
Dream school says they need K-1 forms from the remaining 95% of shareholders to make sure that the other parent doesn’t own the 95%. Is this normal?
They are also saying they need the 1120S that was filed. We (spouse) did not receive that information along with K-1 statement because we have nothing to do with the business entity’s end of year accounting or taxes. If the school has the K-1 stating what our income was from the entity, and we show them proof of the other 95% ownership not belonging to us, why do they need the 1120? Or is it a case of: do you want to go there? Then give them what they want and don’t ask questions!
Is there some kind of corporation document showing who owns the company? If I were one of the other owners, I wouldn’t give you my Form 1120S and I wouldn’t be happy if the company gave my info to others so that they (you) could then send it to colleges around the world.
It is only a need-blind school. It’s also a CSS school so I don’t know what their EFC calculation for us is yet. Based on the cost of the school, we could be eligible for some aid. The school has already given a 23K scholarship, but there would still be lots of room for grants, etc before hitting our FAFSA EFC.
There should be no reason for the college to think we were not being transparent about the other 95%. We are a pretty simple 2 salary household without much else to speak of. Even the 5% of shares in the S Corp clearly isn’t life-changing income for us;)
Not sure why they must see the K-1s for everyone involved, but we are going to do our best to satisfy this request. I just wanted to make sure I wasn’t the only one that thought this was an odd request.
All need blind means is that your financial need was not considered in the admissions deciding. It has nothing to do with money given by the schools.
Congratulations on that scholarship. Remember that it might be viewed as decreasing your actual financial need by that amount…so your need based aid could be less.
Just do the best you can to explain. The college is just doing its due diligence. And that’s not a bad thing. I would contact financial aid and explain that this document is a business form that isn’t yours. Ask them what to do.
They want the corporation’s 1120s tax return to look for deductions that they could potentially add back to your income (i.e., certain things that businesses can take as deductions for tax purposes, but colleges think could be income that could help pay for tuition).
Do you know who the other shareholders of the corporation are? Or do you know the Officers? Maybe the corporation’s President or Treasurer could prepare a letter certifying your level of ownership, and that your spouse is not another owner?
What is your FAFSA EFC?
Since this is a css Profile school and since an Scorp is involved, the school may have determined that you have less need than your FAFSA EFC.
I was able to get the papers from the accountant (whew!) so here’s to hoping the school doesn’t need anything else and that I have the papers they want!
It’s not unusual for them to want the 1120s. Some schools just want the form, others also want the CSS business supplement (which you’d need the 1120s to complete). I’m surprised that wasn’t part of the initial FA application. The K-1 tells them very little about the value of the business and various expenses. I’d get in the habit of requesting the 1120s from the business every year.
One thing to be aware of: you mention the pass-through income in box 1, but some schools will also look at distributions and will treat any distributions in excess of business income as untaxed income. This is not technically accurate, as you have paid, or will pay, a tax on any distribution at some point (in the sense that it has already been, or will be, reported as pass-through income). But that is how some view it. I mention this because it is not at all unusual for S Corp owners to show pass through income with no distribution, or a large distribution with no pass through income, in any given year.
Ugh, @Propinquity4444! We went through this a few months ago with the 1120 and a Business/Farm Supplement. Ultimately my husband filled out the form to the best of his ability, and I sent it along with the 1120 directly to 3 college FA offices with the other shareholder’s SSN crossed out. The good news is my daughter received excellent aid packages from 2 of the colleges. Wishing you the best!