<p>What are the triggers for getting audited for FAFSA and CSS? My son is in his first year & receiving significant financial aid from a private instition. To help pay expenses, I rented out our mother-in-law apartment. Now I’m wondering if it will trigger an audit and make a load of paperwork for me.</p>
<p>MM</p>
<p>Well you know that you are suppose to include rental income on both your taxes and the FAFSA.</p>
<p>Yes I am reporting everything. I’m just wondering if I’m going to have dig up proof of everything I report to FAFSA and CSS Profile and if I’ll have to dig up previous years as well.</p>
<p>The fact that you reported it will probably not trigger anything. You are just being honest which is all you can be.</p>
<p>The Profile schools with which I am familiar review all aid applicants’ information. They do this to make sure they distribute their institutional funds in the fairest way possible. If you have a relatively high AGI and your taxes paid make sense for your AGI, your chances of being selected for verification by the federal processor are not all that high. Having assets and rental income are generally not triggers … although there is always the luck-of-the-draw factor. I wouldn’t worry about it. If a school requests info, it’s usually not all that difficult to gather what they want.</p>
<p>My CPA says I have the option of listing it as rental income or miscellaneous income. I just didn’t know if it made any difference.</p>
<p>A lot of schools will audit just about everyone the first year. I was audited for just applying for loans which had no income/asset stipulations, and when I asked about the absurdity of it, I was told everyone was that first year and this is at a large school. The paperwork on that has to cost the school a bunch because I had to send in my 1040s and a sheaf of other documentations proving my numbers when it didn’t matter what was put down. Just the rules. Thereafter, not another request. </p>
<p>Also some schools will audit anyone getting school funds, and they may draw a line on how much is worth auditing. For someone getting $5K in school aid, they may let that go, but above that, they want to see the paperwork. It can vary widely from everyone to no one getting checked out.</p>
<p>My personal opinion is that if you have listed rental income, I would flag it and want to see the asset attached to it as it should be listed in your assets. You can’t get rental income for something you don’t own. So if you are reporting that, i would want to see what is generating that income if there isn’t a second residence or something listed in the asset values to provide that money. Are you reporting that apartment as an asset of yours? If it’s not your apartment, what are you doing getting the rental income for yourself? WOuldn’'t that be HER rental income as it’s her asset and if she chooses to give it to you as payment for taking care of her and her apartment and affairs, that’s not to be listed as rental income, is it?</p>
<p>My MIL has properties and the rents for them are reported on HER tax returns along with any depreciations, credits, etc. That she then chooses to turn some of the money over to me as reimbursement for her living expenses and other things I do in managing her affairs is a whole other story. She can just gift the money to us which makes things much easier as it then doesn’t require any reporting, though most of it goes towards her care, her things anyways. I don’t list the rental income of her properties on MY returns at all. So, I don’t get what’s going on here. </p>
<p>@cptofthehouse in this case I think “mother-in-law apartment” is referring to a separate living area in the OP’s house or on their property, not an apartment owned by the OP’s MIL. Therefore it would be HER rental income and it needs to be reported.</p>
<p>Yes, “mother-in-law apartment” is just a term of art for a room and bath and often kitchenette in your house with a separate entrance, common in some parts of the country, San Francisco has a lot of them. </p>
<p>I think some audits are random. </p>
<p>That said, I think when people change stuff in a way that makes them suddenly qualify for more aid (not your case), then that may trigger.</p>
<p>I thought in FAFSA you would have to report the value of the part of your home you rent out as an asset. I may be completely wrong, and I have no idea how you would calculate that. (that may be just in the case where you own a duplex and rent half of it out, I just seem to have recalled hearing something like that - Kelsmom?)</p>
<p>^^^
Interesting.</p>
<p>If a family charges “rent” to a college-going child, does that mean his room becomes an asset?</p>
<p>
</p>
<p><a href=“http://ifap.ed.gov/fsahandbook/attachments/1314AVGCh2.pdf”>http://ifap.ed.gov/fsahandbook/attachments/1314AVGCh2.pdf</a></p>
<p>This is from last year, can’t find one for 2014-15.</p>
<p>No new handbook yet for 14-15. This section is not going to change, though.</p>
<p>The apartment is over the garage which is a separate structure from the house. How do you put a value on that without having to pay for an appraisal?</p>
<p>You are supposed to report rent if you rent out a room in your house to a boarder. But that doesn’t change the value of your house necessarily. So if you’ve had room/apt over your garage that’s all considered your property and your rent out that space then you have a renter and you report the rent just as you would if you rented out one of your bedrooms or the basement. If there are any questions from schools, you tell them. Some might flag it, some might not. I wouldn’t evaluate it separately. </p>
<p>That would imply that you still don’t have to include one’s primary residence if one is renting out a room in there. Have to look at that more closely, but I think that is the case.</p>
<p>CPT, you didn’t see the quote 3 posts above yours for FAFSA?</p>
<p>The over the garage thing can also be called a FROG (For Rent Over Garage). /tidbit</p>