How much difference does a few thousand dollars make?

sbjdorlo · December 29, 2011, 11:50pm

My son was accepted to Princeton with terrific aid. I had to do the forms based on 2010 taxes. How much different do you think it will be if my husband earned 2,000 more this year and my son earned 1,500 more this year? In 2010, my dh made 76K, so this year, it’ll be 78K. Last year, son made 1,500, and this year, 3K. How much more money do you think we’ll be expected to come up with?

Thanks.

sbjdorlo · December 30, 2011, 2:04am

To answer my own question, though we obviously haven’t filed our taxes, I redid the numbers on Princeton’s calculator using this year’s income and guessing at a slight tax increase. Based on an income increase of about $3,500 between my dh and son, we will be expected to pay apx. $1,300 more per year. That’s about what we expected-not great but not bad.

crazymomster · December 30, 2011, 9:54pm

I don’t think that S’s income will have that much effect, as I think student income is “protected” up to a certain dollar amount, so I think only your H’s income will have a FA effect.

menloparkmom · December 30, 2011, 10:22pm

your DS can earn up to approx $7500/ yr and not have to report it to the IRS [ or Princeton]

thumper1 · December 30, 2011, 10:52pm

Your sons income DOES need to be put on the finaid applications whether he files taxes or not. But a good chunk of it will not be assessed for finaid purposes, I believe. But you do need to list it on the FAFSA and the profile.

sbjdorlo · December 31, 2011, 12:16am

My son hasn’t filed taxes since he hasn’t earned over $7500 but we do write his income on the financial aid applications.

I wasn’t sure if my son’s income would change things or not; so it is just the increase on my dh’s income that bumped up our contribution, it seems.

3bm103 · December 31, 2011, 9:00am

Unless a student is claiming himself (you aren’t claiming him) then he has to file a return for 2011 if he made over $5800. Less if he had unearned income.

thumper1 · December 31, 2011, 11:30am

YES…and then you indicate that he “will not file” when asked his tax filing status.

We did this with DD and DS for all four years they were in college. DD never had to file a tax return but her income needed to be listed on the Profile and FAFSA anyway. Just put “will not file”.

crazymomster · December 31, 2011, 12:50pm

However, one thing. I think your S’s income is “self-employment” and I think that he “has to” file taxes for any income over a very small threshhold. I think I found that out here and then followed up with it. Make sure to check into it.

sbjdorlo · December 31, 2011, 1:39pm

Hmm, I’m seeing two different numbers, 7,500 and 5,800 for thresholds for filing. I guess we need to look into that. Yes, some of my son’s income is from self employment but his main income is from Mathnasium and a local university. Guess I need to do more investigating. Where would I get this info besides the obvious place, the IRS, since I’m guessing I’d need to wade though a lot of pages if I went to their site?

crazymomster · December 31, 2011, 3:16pm

^ Let me see if I have it in email. I’ll forward it to you if I find it. It may have been a response on the list. Maybe someone else who knows will reply here :-)

3bm103 · December 31, 2011, 4:26pm

The standard deduction for 2011 is $5700. If you claim him on your taxes, then he has to file a return if he makes more than that. If you don’t, he gets his own personal exemption which is $3700. So he must file if he makes more than $9400. But if part of that income is from self employment, he must file a return if he made more than $400 to pay the self employment tax. Also, if any of his income is from unearned income (interest, dividends, etc) then those numbers change.

MisterK · January 1, 2012, 1:02am

It will sound strange, but the IRS is extremely helpful over the phone. I’ve had great luck getting questions answered that way.

Debruns · January 1, 2012, 8:26am

The IRS helped me when my daughter got a form from college which wasn’t he standard W2…forgive me for forgetting the number code, but it was for “self-employment” although she worked for a college program. They didn’t pay her directly, she worked for a masters student and had to file and pay a small amount because she went over the amount allowed. I think she made 5000 from just that job.
I was scratching my head and her employment office wouldn’t help, so I just called and the wait time was minimal…a nice gentlemen explained why the form was given, what to do and it was free.

mazewanderer · January 1, 2012, 12:09pm

If he has self employment income, he still has to pay FICA taxes (social security, medicare etc.) and hence needs to report that income even though he may not have income tax. I am not sure about the Mathanasium that your child works in, but I know a kid who worked in a nearby Mathanasium. The owner would give them a check for the number of hours and not withhold any taxes at source. He told them they need to file their own taxes i.e. treated them like a 1099 contractor.

Also, if the university job held back some taxes, you may have to file a return to get a refund.

mazewanderer · January 1, 2012, 12:15pm

[Federal</a> Insurance Contributions Act tax - Wikipedia, the free encyclopedia](<a href=“http://en.wikipedia.org/wiki/Federal_Insurance_Contributions_Act_tax]Federal”>Federal Insurance Contributions Act - Wikipedia)

Self-employed people

A tax similar to the FICA tax is imposed on the earnings of self-employed individuals, such as independent contractors and members of a partnership. This tax is imposed not by the Federal Insurance Contributions Act but instead by the Self-Employment Contributions Act of 1954, which is codified as Chapter 2 of Subtitle A of the Internal Revenue Code, 26 U.S.C. § 1401 through 26 U.S.C. § 1403 (the “SE Tax Act”). Under the SE Tax Act, self-employed people are responsible for the entire percentage of 15.3% (= 12.4% [Soc. Sec.] + 2.9% [Medicare]); however, the 15.3% multiplier is applied to 92.35% of the business’s net earnings from self-employment, rather than 100% of the gross earnings; the difference, 7.65%, is half of the 15.3%, and makes the calculation fair in comparison to that of regular (non-self-employed) employees. It does this by adjusting for the fact that employees’ 7.65% share of their SE tax is multiplied against a number (their gross income) that does not include the putative “employer’s half” of the self-employment tax. In other words, it makes the calculation fair because employees don’t get taxed on their employers’ contribution of the second half of FICA, therefore self-employed people shouldn’t get taxed on the second half of the self-employment tax. Similarly, self-employed people also deduct half of their self-employment tax (schedule SE) from their gross income on the way to arriving at their adjusted gross income (AGI). This levels the amount paid by self-employed persons in comparison to regular employees, who don’t pay general income tax on their employers’ contribution of the second half of FICA, just as they didn’t pay FICA tax on it either.[10][11]

These calculations are made on Schedule SE: Self-Employment Tax, although that is not readily apparent to novice self-employed taxpayers, owing to the schedule’s rather opaque name, which makes it sound like it is part of the general federal income tax. Some taxpayers have complained that Schedule SE’s title should be changed to something such as “Self-Employment FICA Tax”, so that its separateness from the general income tax is apparent,[12] perhaps not realizing that the SE tax is not imposed by the Federal Insurance Contributions Act (FICA) at all, and that neither SE taxes nor FICA taxes are “income taxes” imposed under Chapter 1 of the Internal Revenue Code.

**Exemption for certain full-time students
**
A special case in FICA regulations includes exemptions for student workers. Students enrolled at least half-time in a university and working part-time for the same university are exempted from FICA payroll taxes, so long as their relationship with the university is primarily an educational one.[13] Medical residents working full-time are not considered students and are not exempt from FICA payroll taxes, according to a US Supreme Court ruling in 2011.[14] In order to be exempt from FICA payroll taxes, a student’s work must be “incident to” pursuit of a course of study, which is rarely the case with full-time employment.[14]

sbjdorlo · January 1, 2012, 1:13pm

I see on my son’s W2 from last year’s Mathnasium that they did withhold state and federal taxes but he never filed. He made about $1500 last year but doubled that this year. I guess he should file! His untaxed income is sporatic, for sure (teaching 4 private students who sometimes come, sometimes don’t is one challenge; he lost two students during the year but will get a new one this month), but I keep records, so we’ll add that in, though it’s utterly confusing to me what was posted above. His work for the state uni. was only $75 and he won’t be tutoring next year since the class was cancelled, but I see they took out for something, social security maybe, but no federal taxes.

sbjdorlo · January 1, 2012, 1:20pm

Oh, and I guess I will call the IRS. My dh’s taxes are so straightforward. This seems so complicated (but it could be because I am not experienced with this sort of thing).

menloparkmom · January 1, 2012, 2:44pm

he does NOT have to file if he earned less than $5800!

crazymomster · January 1, 2012, 3:59pm

^ even if the income is entirely “self employment” (soccer referee) ?

ok, just read through the thread more. in simple English… this is what I understand…

any self employment income over $400 requires a person to file IRS, and while they will not pay income tax, they will pay FICA.

is this it?

How much difference does a few thousand dollars make?

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