I own my own small business where I am the only employee (S-Corp but it’s always been just me). I have no inventory, retail/office space etc. I don’t sell anything and charge for my time. My ipad and laptop are all I need to run my business although of course I do have expenses to pay like my insurance, CPA, website hosting fees, software etc.
Where on the Fafsa do I include the amount of money in my business checking acct? On any given day it ranges from 10k-15k. And how would I determine what my business value is? I read somewhere it was if you were going to sell your business, what could you sell it for but in my case, my business is me so therefore can’t be sold. Is it the value of my ipad/computer which could be sold if I were to close my business?
@BelknapPoint probably can answer this better than I can. I would need to be trained on this if I was still working in financial aid, since I never had to deal with small business valuation.
Thank you! Do you happen to know the first part of my question about where to include the amount of money in my business checking account when I fill out the Fafsa? Thanks!
I have a similar business but it is a C corp. For FAFSA purposes I valued it as equal to the net assets on the balance sheet from the latest tax return (ie equity plus retained profit). I considered the rest (basically my laptop) was de minimus.
Don’t report your business checking account on its own. It’s not yours in the way your personal accounts belong to you. I’m guessing that it would somehow come into play in business value … but I honestly don’t know how that’s determined.
So the amount of money in my business checking account is what I should put for value? there isn’t another spot on the form to list the checking account balance?
It’s so confusing to me. It’s not like I can just use the money in my business checking acct to pay for college and if I want access to the money I would need to write myself a paycheck and taxes would be taken out so I would not receive the full amount anyway.
Thank you! Yes that is what I thought that I can’t just use the $ in my business account to pay for college in a straightforward way like I can with the $ in my personal accounts. But I also don’t want to seem like I am not disclosing that I have 10-15k so I am assuming that I have to put it somewhere on the form?
I used the end of last year since that is net profit after tax. I wouldn’t use today’s bank balance since that presumably includes cash that hasn’t yet been taxed.
Right, but if you are matching up with the 1040 (presumably filed for 2022) you would then want to use the business’s balance sheet for the end of 2022.
I don’t think there’s a need to match to 1040 timing.
Whenever I talked to FA folks about this, they typically wanted current S Corp value. (Which is practically a lot easier to determine than C Corp, for which I agree a prior tax return might be more useful).
Now I am even more confused. I wish there was a clear cut answer in terms of how to respond to value of business and where to disclose my biz checking balance. I’m sure I am not the only person with an scorp without employees/inventory/retail space who doesn’t know how to correctly answer these Fafsa questions. I asked my CPA for help in filling out the CSS profile and he advised me on some answers I wasn’t sure about but college financial aid forms are definitely not in his wheelhouse.
You might want to call one of your schools next week & ask them. Make sure you ask to speak with someone who can help you with a specific question about valuing your small business. If I were still working in financial aid, I would have access to a NASFAA Q& A for regulations … schools can ask that question if they don’t know the answer. And frankly, they should know the answer (because they will be asked & because they may need to verify information related to that question).
With my C corp I used the value from the previous year’s tax return, including the bank balance (ie assets) then. There was no need to add anything about the current bank balance.
I can see an argument for doing the S corp value as of the current date, I assume that you are making estimated tax payments and distributions to cover these, which reduce the assets to an after tax figure.
But since you are already including the bank balance in the business value (whether as the EOY or current value) then you won’t want to double count it as a personal asset. So why would you expect to have to list it separately?
See the thread below. You might want to double check if the change applies this year or is pushed back to 2024-25.
Also, see article in WSJ from Dec 21, 2023 „Congress’s College Financial Aid Fiasco The revised student aid form means middle-class parents will pay more.“
and specifically the following:
„ Parents who are sole proprietors might have to borrow against their business assets to pay tuition. But there’s a loophole: Families with less than $60,000 in income or with one member who has received a federal means-tested benefit in the last two years won’t have to report assets. This is an inducement for every college student to sign up for Medicaid.
Under the Education Department’s draft FAFSA, free and reduced school lunches also qualify as a means-tested benefit. But progressive governments such as California and New York City have made free lunches available to students regardless of income. All California parents of public school children thus wouldn’t have to report their assets and could qualify for much more aid. In response to comments pointing out this loophole, the department said it is “researching all available options."“
Thank you! Yes I agree I think I need to call the financial aid office at one of the schools my daughter has applied to because the responses here are varied and I want to make sure I am answering it correctly.
To me the value of my business if I were to sell it in a firesale means nothing since I don’t have the type of business that can be sold. And if I closed my business I can’t just pull the money in my checking acct out - I can access the funds only by writing myself a paycheck and after taxes etc are taken out, my net is obviously going to be lower.