<p>my mom runs a daycare and gets paid in cash, and does not file taxes. should i include this in my parents’ adjusted gross income? or is that just straight from the forms only?</p>
<p>In no way am I encouraging illegal conduct, but there are many, many people who are paid in cash and do not report it on their taxes, If people want to go off on whether or not its legal or ethical, so be it. FAFSA does however want to know about the cash (I think its to be reported on schedule B).</p>
<p>If you dont report it and you are selected for a verification (a fancy word meaning audit) by a school, you may be asked to send pretty much any financial documents the school asks for. If there is a paper trail to unreported cash and someone catches it, you and your parents would be in trouble. Do your parents file Schedule C writing off her business expenses? The term writing off refers to against some income. If your parents are writing off the day care expenses, against what income? </p>
<p>Bottom line, not reporting the cash carries risk. Is it worth the risk of not reporting (paying back money, penalties, IRS involvement)? You and your parents have to decide.</p>
<p>well it’s not a daycare per se; she doesn’t have her own building or anything. it’s more like she just babysits a couple kids while their parents are working. anyway, i should just add up the cash with my dad’s income to get the adjusted gross income, even though my mom’s income is unreported?</p>
<p>bumppppppp</p>
<p>Line 73 of FAFSA wants your parents adjusted gross income (AGI) as stated on either line 37 of 1040, (or line 21 1040A or line 4 1040EZ.) If you just take your parents AGI from whatever tax form they file and add the unreported cash to it and then list that amount on line 73 of FAFSA, if verified, it wont match. You then have a problem which may require an explanation and/or further documentation explaining the discrepancy. You dont need to give me the answer, but if questioned about such a discrepancy, how would you/your parents explain it?</p>
<p>Im not an accountant, so if someone wants to correct me, its okay, but I think your mom would be viewed as self employed and I think that means she has to file a long form (1040). And even if shes not deducting any expenses, I think the cash is properly reported on 1040 line 12. If the cash was reported there, it would be okay as it would then be included when your parents AGI is determined and then you could simply transfer your parents AGI to line 73 of FAFSA. The bad news is that the cash would be taxable. Good luck.</p>