[Oasfaa] Verification Question

[Billie Stewart]

Is there anything that needs to be done differently for those students that
have a negative AGI.
Billie Stewart
Southwestern Christian University

On Mon, Nov 9, 2009 at 5:30 PM, Mc Conahay, Pamela K. <pmcconahay at ou.edu>wrote:

> Jonna,
>
> Yes, you should go back to treating business/farm losses as zeroes when
> calculating income earned from work.  If I was the trainer at that workshop,
> I screwed up.
>
> I think the key thing here is for people to understand how the 'income
> earned from work' is used in the EFC calculation.   It does two
> things---allows the formula to accurately calculate a FICA allowance, and
> also drives the employment allowance.
>
> If you treat subtract the negative amounts on lines 12 or 18 from the
> positive total of wages earned from line 7, you won't be giving the
> parent/student an accurate FICA allowance in the EFC calculation.
>
> If you work at the mall and make $25,000 a year, you pay FICA on that
> $25,000.....even if you have a business loss of $10,000 on line 12.  You
> don't pay any FICA on that business loss, so it should be treated as zero
> when totaling up the income earned from work;  the correct income earned
> from work is $25,000.
>
> The accurate FICA allowance is $1912 (25,000 x 7.65%).  If you subtract the
> $10,000 loss from the $25,000 wages and put $15,000 as income earned from
> work, the FICA allowance is only $1147, and the person has $765 more in
> available income than is really true, incorrectly inflating their EFC.
>
> The same logic holds true for the employment allowance (which is supposed
> to reflect the 'cost of working' like gas, clothes, lunch, etc.).  In order
> to earn $25,000 at the mall, the correct employment allowance should be
> based on the $25,000.  It didn't cost you any less to get to work and earn
> that $25,000 just because your side business went in the hole.
>
> Pam McConahay
> Associate Director, University of Oklahoma Financial Aid Services
> pmcconahay at ou.edu
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>
>
> -----Original Message-----
> From: oasfaa-bounces at lists.onenet.net [mailto:
> oasfaa-bounces at lists.onenet.net] On Behalf Of Jonna Raney
> Sent: Monday, November 09, 2009 4:45 PM
> To: oasfaa at onenet.net
> Subject: [Oasfaa] Verification Question
>
> Years ago, we treated amount on line 12 or 18 on the 1040 as zeroes. Then,
> we went to a training a few years ago and they specifically said to subtract
> negative amounts when calculating income from work.  So, we started
> subtracting the negative amounts.  However, a colleague at another school
> emailed today and had found the following in the regs...
>
> "Income earned from work and the IRS 1040 form
> The FAFSA instructs the applicant to sum lines 7, 12, and 18 of the 1040
> form and box 14 [code A] of Schedule K-1 (Form 1065) as an option for
> determining the income earned from work. But when the values of lines 12
> or 18 or box 14 are negative, this will reduce the total and can wrongly
> affect the Social Security al-lowance. If values from lines 12 or 18 or
> box 14 are negative, treat them as zero when determining the income earned"
>
> So, now I think we need to go back to treating them as zeroes except that
> the FAFSA simply says to total lines 7, 12, 18 and Box 14A, etc. and doesn't
> instruct to treat negatives as zeroes so I'm sure most will subtract them
> because that's how you logically total a negative.  Right?
>
> So, what do you do?  I can take it if everyone tells me we're doing it
> incorrectly.  :-) I would rather hear it from you all than from a program
> reviewer.
>
> Jonna
>
>
>


-- 
Mrs.Billie Stewart
Financial Aid Director
Southwestern Christian University
(405) 789-7661 X 3431
billie.stewart at swcu.edu
www.swcu.edu/financialinformation






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