Day 1: Tax Returns, Tax Transcripts & Financial Aid

• Introduction to the income tax and its relation to financial aid
• The knowledge expectations of the Department of Education
  • Who must file a tax return?
  • A dependent cannot be claimed on more than one tax return
  • Who is eligible to file a 1040A/1040EZ?
  • What is the right filing status (with a focus on understanding the Head-of-Household status)

• Review all verification items related to the tax returns
  • Strategies for using the transcripts as effectively as possible
  • Understanding rollovers and other pension issues that complicate verification
  • Review education credits
  • Understand why the department introduced the removal of the “excess and may trigger professional judgment consideration advanced premium tax credit” from US taxes paid and why it is calculated differently on the 1040 and 1040A

• Income earned from work
  • Using the transcripts as efficiently as possible to clarify the answer to this
  • What “counts” and what does not “count” as income earned from work question
    (related mostly to conflicting information resolution)

• Taxable scholarships (a conflicting information concern)
• How to calculate the AGI and US Tax Paid when the marital status of the applicant/family member differs from the tax return
• Considerations for professional judgment/base year issues
  • Schedule A (Medical, Casualty and Loss, etc.)
  • Line 21 (Foreign Income Exclusion, gambling, taxable withdrawal from education
  • Schedule D (What are capital gains and what can we learn from Schedule D)?accounts, cancelled debt)

• Addressing the Department’s concerns about high interest/low assets as conflicting information

Day 2: Business Tax Returns and Financial Aid

• Thinking about equity: are business owners advantaged or disadvantages compared to employees in the financial aid process and can we address any inequities?
• Introduction to businesses and what they have in common
  • The business owner and employer and employee (the self-employment tax calculations
  • Understanding basic business expense deductions
  • Understanding depreciation, amortization, and depletion

• What are these?
• When should they be “added back” and when should they be “allowed”?
• The unique issues around Section 179 Expensing
  • Car and Truck Expenses/Home Office Deductions

• What are they?
• When to “add back” and when to “allow”

• Understanding pass-through businesses
  • When is taxable income not distributed to taxpayers
  • How can we understand the nature of payments/distributions to owners?
  • Can we identify resources the owner has access to within the business?

• Valuing a business
  • Understanding why business owners often undervalue their businesses
  • Assigning a value to a business using
  • Partnership and Corporate Balance Sheets
  • Asset by asset
  • Based on the business’s income and reputation
  • Understanding how business transactions impact the balance sheets
  • Understanding capital accounts and shareholder equity
  • Understanding loans to owners, loans from owners, and whether a business can
  • provide the owner with funds to cover college costs

• Review of the specific tax returns and opportunities for aid officers to improve their understanding of a business owner’s access to resources for each of the following structures
  • Personally Owned Real Estate (Schedule E)
  • Schedule C Businesses
  • Farms (Schedule F)
  • Partnerships (1065 and Schedule K-1)
  • S corporations (1120S and Schedule K-1)
  • C corporations (1120)
  • Trusts (1041 and Schedule K-1)