They are going to take both your mom & your stepdad’s income and assets into account. If your stepdad has ownership in a small business, they are probably going to consider some of those assets and some of the income for that as available as well.
Can you get one of your parents to help with this? I can see how it is tough for a 17 year old to understand. Maybe your stepdad can help you talk with the schools and understand whether the forms were filled out correctly and whether there is any extenuating circumstance that should be documented for the colleges.
It seems that OP’s parents don’t understand the difference between FAFSA and CSS profile.
The FAFSA disregards small businesses that have less than 100 employees. Colleges that use CSS profile take into account of everything the parents own. If the parents own 100% of the business then 100% of cash and real estate value of the business will be factored into the FA calculation by colleges that use CSS profile.
So, to clarify: CSS Profile didn’t “mess up” your financial aid; your step-father’s personal income tax return was completed incorrectly, which led to some incorrect (but understandable) assumptions on the part of some of the schools that you applied to.
I didn’t mean he actually owns the company, he just belongs to it.
Another thing that the fin aid officer at USC said to me was that:
1.) I need to get our cpa to somehow prove (with documents) that the interest income on our tax returns (marked as a company, not direct) is not useable by us for college, and that it is ONLY going to the business. That will return our checking/cash/savings back to where it is supposed to be, 290k less than what they are saying it is. They are assuming the interest income from the company is coming from an account we own and have discretion over, when that isn’t the case.
2.) The losses in schedule E are all assumed to be paper losses, and if we want to prove that we don’t have the money for the school we must provide documentation AND a letter from the cpa explaining how it is a real loss and not just for the purposes of tax reductions.
What I don’t get, is what forms prove this? They already said that the letter our cpa provided on its own was not enough.
Okay, more of this has just been revealed to me. My step-father does indeed have ownership in the company, but it is jointly owned across the 20 members of the business. Therefore he does not have control over spending the money for anything outside of the business (it cannot be used to pay for my college education since it belongs to other people too in the company). What kind of form would prove this? My step-dad’s K-1 and the actual company’s tax returns didn’t do anything. Would I go to our CPA or the business’s CPA or both.
They refuse to help anymore. They’re fed up with this whole situation and just want me to go to a state school, although I should be able to get fin aid for the privates.
Sounds like your dad’s company is a pass-through entity (S-corp or partnership, or LLC treated as an S-corp or partnership). Maybe there was an error on the K-1 where whoever filled it out forgot to divide the company’s total interest income by the appropriate amount to represent each owner’s proportional share? If so, that would be a major problem that I would think your Dad would want to get resolved regardless of its impact on your financial aid!
It seems right now that we just have no way to prove that my stepdads interest income through the company can’t be used for college. He called it “working capital”, and that it was used exclusively for the business’s expenditures, meaning it doesn’t belong to him even though he is the CFO.
How in the world do we prove this? The counselor at USC claimed that a cpa letter needed to be backed up by documents, but I have no idea what kind of documents would support that.
Also, we have a huge income loss through our company that practically nullifies my step-fathers adjusted gross income. They are counting it as a paper loss, although it pretty much makes my mother’s income the only source of income. Once again, what documents would prove that the company loss is a real loss and not just a paper loss (cpa letter is not enough again).
That sounds like a plausible explanation, given OP’s claim in the first post that the amount reported for FA is 20 times what it should be and OP’s later information that his father is one of 20 co-owners of the business. Mystery solved, and it had nothing to do with CSS Profile being “messed up”!
Its not that the interest income was overestimated, but that the money DOES NOT belong to him and his spending. The savings that the interest income comes from belongs to the company, not for his personal use. All of the interest income goes back into the company to keep it running (it is in the negative). How do we prove that this is not college money?
The way it works is that the S-corp’s income is reported as income for the owner on a K1 and goes on the owner’s personal return, whether the owner took the money out of the corporation or not. The owner usually COULD take it out if they choose to (I could with my S-Corp). I don’t know the circumstances under which a college FA department will decide to disregard that income in their calculations, though.
If the income is reported as a whole (not divided by 20) on the personal income tax return then the dad has to pay tax on that income. How could his accountant not see that?
Sorry…but the money DOES at least partially belong to your step dad, or it should not have been included in HIS taxes.
First thing to do…make sure the taxes are filed correctly.
Second thing…to ME it sounds like your family does have assets but much of them are tied up in your step dad’s partial ownership of the business. You need to understand…that business has a value, as does the interest from that business. That you have no access to the money NOW is not relevant. What is relevant is that you could have access to this if the business was liquidated.
You have appealed to these schools and asked that they not consider your step dad’s business money. All three of these schools have said NO to that appeal.
This doesn’t sound like a glitch at all to me (unless there is information these schools did not receive or see). It sounds like a situation where the stepdad income and assets, including the business (which would not be reflected on the FAFSA) are being considered.
Also…what is your family overall income?
Documents that support the business loss. This would include debts, assets, money paid out…ALL of the financials from the company that show that it was running at a LOSS. The financial person at the company should have all of this information.
The school wants specifics…what exactly WERE these paper losses?
But here is the BIG question…if the company is losing THAT much money…how is it paying salaries and benefits to its employees? The school will want to know that too.
I used to be an owner of an S-corp and if I remember correctly, the way it worked was that any profit the company made was passed through to me as income. I don’t ever remember the company’s gross income being reported on my taxes as my income. The corporation had its own tax number for bank accounts and such; interest income would have been reported with the company tax number, not my social security number.
Mine was a very small company (just two owners) but we still had a balance sheet and filed a company tax return, and the articles of incorporation showed the division of ownership. Given a situation like yours, those would be the “documentation” I would use to show the financial status of the company and my share of its assets/income. It would be extremely unusual, I think, for the company not to have such documentation available.
My guess is that there isn’t straightening out to do. His stepdad’s portion of the company net income (with some expenses added back in) and assets is considered available by schools.
The paper loss issue – a paper loss is not an actual cash loss, in other words the company may well be running with positive cash flow, able to pay it’s actual real bills, and perhaps even accumulate cash, but there are other “expenses” it can take, like depreciation of fixed assets, or interest payments on a line of credit that are being capitalized rather than being paid – these “expenses” are deductions from the company’s current income for taxation purposes even though they do not represent actual outlays of cash in the current fiscal period.
The schools may be looking at that and thinking that the business is indeed generating more money than it looks like it is, and that therefore there should be more money available to pay tuition.
Thank you all so much for your advice, I’ll try to get the forms one more time (let me know if you think of anything else).
I guess one question I still have right now is if the interest income going to my stepdad isnt restricted, yet is going back into the business to keep it afloat, could some sort of proof of that exempt that from being considered? I mean as long as the business isn’t making money it shouldn’t be considered as a positive asset right?