<p>The kid <em>still</em> has to report the $1000 as income. </p>
<p>You should have some reason why the kid’s money is in your account, namely that it isn’t your kid’s money anymore. He gives you the money maybe for rent, if he lived at home, or reimburses you for some other expense you incurred on his behalf (medical, whatever). </p>
<p>If you then decide to pay some of his portion of his college costs for him, how nice of you. </p>
<p>An alternative to having the money in a parent account is for the kid to spend it – paying his share of the family contribution for the fall, paying off some of his loans, taking fewer loans, pre-purchasing textbooks, etc.</p>
<p>The point is just that it’s better, if the kid has things he needs to spend the money on, for him to spend it before he fills out the FAFSA rather than after. If he’s filling out the FAFSA in February or March, it’s quite reasonable for him to have spent the prior summer’s earnings by then and have virtually nothing left in the bank. I wouldn’t totally empty the kid’s account, but you don’t want a big chunk of cash sitting there either. If he’s saving for something (even the next semester at school) it’s better for the money to be elsewhere (i.e. he pays additional expenses and you save on his behalf).</p>