<p>Can someone healp me with the FAFSA question that asks the amount of income earned from work. If someone has no farm income, it would seem the answer to that question would be essentially the same as the amount of wages, tips, commissions, etc. question which is also on the FAFSA form under parents’ income. </p>
<p>I am confused by the difference between the 2 questions. Can someone clarify</p>
<p>The question about income earned from work is used in the EFC formula to calculate allowances for certain items that are only related to income from work, rather than income not from work such as interest income. The main allowance is for FICA taxes (which is over 7%). Those allowances reduce your available income in the EFC formula, reducing your EFC.</p>
<p>“The main allowance is for FICA taxes (which is over 7%). Those allowances reduce your available income in the EFC formula, reducing your EFC.”</p>
<p>Does this mean that the “income earned from work” number is higher than the (wages, tips, etc.) number because the former includes FICA and othe taxes. What confuses me is that if I follow the instruictions on the FAFSA form, which lists the lines from the 1040 that go into the income from taxes calculation, the total is essentially the same as the wages, tips, line on the FAFSA form. I do not know if that makes sense.</p>
<p>If the only kind of income on the return is earned income then, yes, the two numbers will be the same.</p>
<p>If you were only paid on a W2, where FICA and other taxes would have been withheld, then “income earned from work” would equal “wages, tips, commissions”. But if you have 1099 income, such as for a consulting job or income from a sole proprietorship, the two would not be equal as FICA and other taxes are not withheld from 1099 work.</p>
<p>
No. If you are a tax filer you report the AGI from the tax return on FAFSA. The total AGI may be from a mixture of income earned from work and other income such as interest or dividends. (In your case your whole AGI may be from earned income. For a lot of people there is other income included in the AGI.)</p>
<p>Say for instance someone has a total AGI of 50,000. If $2,000 of the AGI is from interest income and $48,000 of the AGI then the AGI of $50,000 is reported as AGI, and you report the $48,000 on FAFSA as income from work. In the EFC formula the income earned from work will be used to calculate an allowance for your FICA taxes (income not from work does not incur FICA taxes). So 48,000 x 7.65% (the % for FICA) = 3672. When the EFC formula calculates your EFC it takes your AGI of $50,000 and deducts the 3672 from it, reducing the income available in the formula.</p>
<p>The two questions are asked for different purposes. One is to determine income. One is to determine how much of your income can be used to calculate allowances that reduce that income in the EFC formula. The amounts may be the same for some people but not for others. You need to answer the questions.</p>
<p>Bottom line, if you do not report the income from work your EFC will be higher. So just follow the instructions on FAFSA.</p>
<p>Yes, they could be the same number. If you have no business, farm, interest earnings, etc.</p>