I will be filling out the FAFSA for 2017. Our taxes include form 2106 which shows all the money that is paid out of my pocket such as mileage, home office, office supplies, professional fees etc. These are expenses that I am not reimbursed. My son will be applying to several of our public universities in California. Does the FAFSA provide a place for these non reimbursed expenses which so obviously reduces my actual income but does not affect the AGI? My work expenses are significant and therefore affects how much money is in my pocket vs someone else who does not fill out form 2106 and has a similar AGI. Does anyone else find themselves in this situation?
If you have unreimbursed employee expenses from form 2106, don’t they show up on your schedule A for itemized deductions? Then doesn’t that reduce your AGI?
Do you use your vehicle for business purposes for your employer, and your home office as well?
No, the FAFSA doesn’t have a place to list those expenses. They are already listed on your tax return.
No, Schedule A itemized deductions are NOT a reduction from gross income in determining AGI.
There is no place on FAFSA for itemized deductions.
You could eventually try to ask the school for ‘professional judgment’, but what would you gain? Are you hoping your child qualifies for a Pell Grant?
What is your AGI and what is the amount of your 2106 expenses?
the public universities in CA use the FAFSA only to determine eligibility for need based aid. Are you hoping to get a Calgrant?
There is no place on the FAFSA to explain these expenses.
As an FYI, some colleges (usually schools that use the Profile) actually add these expenses back in as income…especially things like car expenses, cell phones, home office. Simply put…you would have car exoenses, cell phone, and that part of your home anyway…even wothout a business.
As noted, you could ask for professional judgment once your applications are submitted…but as @Madison85 asked…what is your end goal? Is it to get your income below the threshold for CalGrant or what?
AGI= 109,000
Form 2106: employee biz expenses not reimbursed: $21,000
taxable income: $64,000
I am an employee NOT an independent contractor. I am not reimbursed for all of my mileage and we use our home office etc.
I realize my son would not be eligible for a Cal Grant–I am concerned with our EFC. when I did a quick calculator for EFC, it came out to be approx $32,000 for the year which is about the same cost of the UC
I’m confused…$109,000 minus $21,000 is NOT $64,000.
Your AGI is the important number for FAFSA purposes.
I never said that 109k-21k=64k
The taxable income number is what I actually paid taxes on after all deductions. Sounds like I should not bother filling out the FAFSA. We can’t afford $32K for the EFC. Thank you for your help.
You should fill out the FAFSA. Your kiddo will be able to take a Direct Loan if you do. The NPCs give a decent estimate of your net cost…but you won’t know your actual EFC until you submit the FAFSA.
It’s free, and you have nothing to lose by completing it.
Can you read this thread…and comment?
FYI, California law requires employers to reimburse business-related expenses. https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/california-businessrelatedexpenses.aspx
For Federal income tax purposes, expenses that your employer would have reimbursed are not deductible, even if you don’t request reimbursement. 2106 deductions for CA residents with CA employers run a high risk of being disallowed on audit, either as being reimbursable by the employer or as being not “ordinary and necessary.”
I can’t access this link.
@allyphoe the link takes us to a place to sign up for something. Any chance you could post the info?
Maybe not applicable to the OP but generous meet full need Profile schools will consider non-reimbursed employee business expenses in their EFC calculations.
But it may be worth it to investigate having the employer reimburse the expenses. Especially the mileage.
What does the OP hope to gain? The AGI is above that for the Calgrant…and with that AGI, the family would not be eligible for any federally funded grant aid (Pell or SEOG).
But I would complete the FAFSA…and see. I could be wrong about these numbers. The OP will link their taxes via the IRS data retrieval tool anyway. Maybe the financial aid folks will see this in a positive light.
All the IRS retrieval will bring over from tax return is AGI, income from working, tax paid I believe.
The point is that the employer should reimburse those expenses if that is the CA regulation as @allyphoe indicated.
Then the OP does not have to file 2106 and possibly be flagged for audit.
Without disclosing any more personal info, I have no concerns about my use of Form 2106. I have beeen employed in my profession for almost 20 years and have had direct help early on when I first started from the IRS who instructed me to make sure I filled out this form as it affects the amount of taxes I owe. I have had a handful of accountants all do my taxes the same way. All of my co-workers who use accountants also fill out form 2106. My taxes have never been flagged. My situation is not the average employee so I will deal with the school directly. Thank you to all who tried to help me.
I would just make sure you are getting the most reimbursement for your actual expenses as possible. If the employer reimbursed you directly, would that net a higher amount compared to form 2106 (isn’t it limited to expenses above 2% of AGI)?
^here is information about a simplified option for home office deduction in case you were interested, it is supposed to simplify calculation and recordkeeping requirements.
At IRS.gov there is an easy to follow schematic re: who should fill out form 2106 It is a PDF and it makes this discussion re: reimbursement very clear. Thank you all. I have decided to pursue my original discussion with my professional organization that I am a member of—surely some of these folks have dealt with trying to help put their kids through college.
Sorry, I got to the original link via Google, and there was no redirect on it. Same topic covered, with the same statutory citation, here: http://www.rhdtlaw.com/want-pay/