Will having a job affect Pell/TAP Grants?

Paying for College
1

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<p>My family is poor and their EFC will undoubtedly be 0. However, I have a sort of lucrative business opportunity and I may want to get into daytrading. So how much can I make before my Pell and TAP Grants begin to drop? What if I have assets in my bank account/broker account but no income (assuming I run the business under someone else and get paid cash), would that have any effect on the grants?</p>

2

<p>any money you earn over 2650 will increase your EFC by 50%</p>

<p>for example if you earn 3650</p>

<p>3650-2650 =1000
1000*.50 =500
your efc will be 500</p>

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<p>As long as you can clear this with the IRS and have no problem paying back to the school and the government any financial aid you recieve, and have no problem with the federal penalities for lying about your income on your FAFSA, you should be ok.</p>

3

<p>Why $2,650?</p>

4

<p>“why $2650”</p>

<p>because that is the number the federal government has established as “protected income” for students. It could be used to pay incidental expenses that are not figured into the COA (cost of attendance).</p>

<p>It is great that you have an opportunity to join a lucrative business and make some money – that will help pay for college without having to rely on Federal Aid.</p>

<p>I would never suggest that you “get paid in cash” or “run the business under someone else’s name”. this is illegal and you are kidding yourself if you think it will work out without you getting caught. If you are talking small numbers (like an income of $2650) it might just fly under the radar for a while – but since it won’t jeopardize your FA, why take the risk?</p>

<p>If it is more than $2500 in income, it will show somewhere. Whoever’s name you are doing it under – they will be paying taxes, social security, etc on the income – plus it will put them in a higher tax bracket. It may really cost them! someone’s SSN will need to be used for transactions, deposits, bank accounts, transfers, registrations, etc. </p>

<p>The IRS is getting much better at detecting tax fraud. And the number of people who report tax fraud is increasing – if I pay my taxes and legitimately report my income, so should you.</p>

<p>Finally, realize that the penalty for getting caught is severe – not only do you have to pay back the financial aid you recieved (not just the difference between what you got and what you would have gotten with the different EFC) but ALL OF IT! that means all grants! And it is due immediately, not a payment plan. You are also banned from applying for financial aid for a minimum of 10 years. </p>

<p>On top of that, FAFSA fraud can put you in jail and/or $20,000 in fines.</p>

<p>The school has the right to determine whether your fraud falls under their ethics code (the one you sign when you start college) and can retract your diploma.</p>

<p>Penalties for IRS tax fraud are stiff, fines and jail time are included here.</p>

<p>Not only that – but a day trader who gets involved with fraud is going to attract the SEC and you attempt to save a little money while going to college may leave you with a record that prevents you from getting a job.</p>

<p>This should be enough said – if you are mature enough to go to college and earn a degree, you are mature enough to make a legal income.</p>

5

<p>What is a TAP grant?</p>

6

<p>How does owning an actual corporation factor into getting financial aid. I quality for automatic zero EFC since my parent’s EFC is so low, and according to EFC calculators even if I make $1,000,000 a year my EFC is still technically 0. Is this correct?</p>

<p>Does it matter if I own an S-Corporation (money is claimed as my income at the end of the year) or a C-Corporation (money is the corporation’s, a separate entity, and taxed by corporate tax rates…so basically it isn’t mine to use).</p>

7

<p>no it is not because your income and assets are also used in factoring your EFC. As a matter of fact any income assets you have are assessed at 35%. If you have a million dollar business, even if your parents don’t make a dime, your EFC will be $350,000</p>

8

<p>But it’s not my money. A C-Corporation is a separate entity, the money belongs to XXX Inc. not me!</p>

9

<p>ok – that’s fine. If the money belongs to XXX Inc. and you are not paid a salary/commision/paycheck by them and you do not own any part of it – it will not effect your EFC. Is that what you are asking?</p>

<p>your EFC would be affected by any assets you have (like ownership or part ownership of a company) or any income you make over $2650.</p>

10

<p>But since I own XXX Inc, even if I’m not paid a salary, according to the FAFSA I have to report it’s earnings (C-Corporation). How do they know if I’m paid a salary or not?</p>

11

<p>If you aren’t paid a salary – then you receive no income from it and that won’t affect your EFC. Company earnings are different from salary. if you were paid a salary and the corporation you owned made money – it would would hit you twice.</p>

<p>If you own a corporation, you will file taxes on the value of that business and whether you made or lost money. you don’t get to file an easy tax return – like the 1040EZ or the 1040A. You would be required to file the 1040 with the additional forms for someone who owns a business. The increase in value of the business (and it can be quite complicated to fill out the paperwork) shows on the IRS tax forms as income. When you fill out the FAFSA, it asks for the numbers you put on those lines on the tax forms. That is how it shows up.</p>