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Professional Judgment
 
Employment Expenses

Any non-discretionary expense that enables the production of income and which is generally considered mandatory for a field of employment should qualify for an adjustment to income. Examples include malpractice insurance (i.e., no doctor would practice medicine without malpractice insurance, and many practices require their doctors to carry malpractice insurance), uniforms, union dues, tools and specialized equipment required for the employee's trade, and errors and omissions insurance.

But this would only be to the extent that the expense is not already included in one of the existing allowances, such as the income protection allowance (IPA) or the employment expense allowance (EEA). The IPA provides for basic living expenses of the family: 30% for food, 22% for housing, 9% for transportation, 16% for clothing and personal care, 11% for medical care, and 12% for other family consumption. The EEA provides for extra expenses that are inherent in families with two working parents or one-parent families where the single parent works and not in two-parent families where only one parent works, such as housekeeping and childcare services, transportation, and meals away from home.

In addition, the amount of an adjustment for employment-related expenses should not exceed the income produced by the employment.

If a family maintains two households because one parent works in another state, the financial aid administrator can use professional judgment to make an adjustment to income for the costs associated with maintaining the second household. These include rent, utilities, and perhaps transportation. The rationale for an adjustment is that the expenses were entered into solely for the purpose of producing income and are necessary to enable the production of income. The adjustment should not exceed the amount of the second income. (Technically, the financial aid administrator could use professional judgment to treat them as separated, since maintaining separate households is the key criterion for an informal separation. However, absent any evidence of an acrimonious relationship, most financial aid administrators would not override the parents' marital status.)

Financial aid administrators who are considering such an adjustment should request a copy of the full income tax return (including schedules A and C and Form 2106) and make sure that the expense isn't already being considered. For example, if the expense appears as a deduction on schedule C, it has already been used to reduce AGI. On the other hand, if it is itemized as an employee business expense on Schedule A, it does not reduce AGI and so was not considered in need analysis. So business expenses deducted on Schedule A may be suitable for professional judgment, but not expenses deducted on Schedule C. The financial aid administrator will also need to verify that the expense was not reimbursed by the employer.

The financial aid administrator may need to review the actual expenses to determine whether they are reasonable. For example, many clothing stores require their employees to purchase and wear only the store's brand of clothing in the store. The financial aid administrator would need to identify what the store is reasonably requiring the employee to purchase.

 

 
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