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SELF-EMPLOYMENT, CONVERT INC. TO MONTHLY AMT

ISSUE DATE: 11/2017

SELF-EMPLOYMENT BUDGETING

The self-employment budget period begins in the month of application or in the 1st month of self-employment. Applicants and participants must choose 1 of the methods described below for determining self-employment earned income. Self-Employment expenses are not used in the budgeting calculation, unless there is a program provision.

SELF-EMPLOYMENT INCOME CALCULATION


The agency must determine self-employment income based on client choice for each self-employment business. Clients may choose either method, if taxes were filed within the last 12 months.

50% of gross earnings from self-employment.

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As determined by business records or self-employment form.

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Gross earnings are defined as earned income before taxes and deductions.

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This method is based on using current income to calculate self-employment income.

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Document the calculation and which option the applicant or participant has chosen in CASE/NOTEs

OR

Taxable Income.

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As determined from an Internal Revenue Service (IRS) tax forms that has been filed with the IRS within the last 12 months.

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Taxable Income means “Net profit” from the applicable annual tax forms.

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Divide the “Net profit” by 12 months to find the monthly average income for the year. If the business has been operating for less than 12 months, then divide by the number of months the business has been operating.

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This method is based on using an annual average to calculate self-employment income.

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Document the calculation and which option the applicant or participant has chosen in CASE/NOTEs.


Current program participants must continue to use the same method for each self-employment income source, unless they meet a program-specific changing option (listed under program provisions below). If the client applies for an additional program, they may choose to use either the 50% gross or taxable income method for that new program.


MFIP, DWP:

"Current Income using 50% Method" means using income based on the budgeting method used. See 0022.03.01 (Prospective Budgeting – Program Provisions), 0022.06 (How and When to Use Retrospective Budgeting).

Self-Employment Hours: Only the hours the participant earns the federal minimum wage count toward the participation requirements. The number of self-employment hours is determined by dividing the net self-employment income by the federal minimum wage.

Changing Options:


Participants must be given the option to change their method of self-employment income calculation at recertification.

Participants who use the 50% of current self-employment income method, may choose the Taxable Income method at the next benefit month.

Participants who use the Taxable Income method, must continue to use this method until recertification, unless there is a Major Change. See MAJOR CHANGE in 0002.39 (Glossary: Lump Sum...). Participants with a Major Change can choose the 50% Method for the next benefit month.


SNAP:

Self-Employment situations that have a farm loss DO NOT have the choice of the 50% of gross earnings or the tax method to calculate Self-Employment income for any unit member’s self-employment business. See 0017.15.33.24 (Self-Employment Income From Farming) and the SNAP Farm Loss Policy Guide (PDF).

Calculate Rental Income using the information in 0017.15.33.30 (Self-Employment Income From Rental Property) to determine earned versus unearned income. Count income from rental property as earned income when the unit spends an average of 20 hours or more per week maintaining or managing the property, otherwise count it as unearned income.

Under the 50% of gross earnings from self-employment method, “current income” is determined using gross business receipts received 30 days prior to the date of application, Combined Six-Month Report or recertification. Current income is an indicator of the gross business receipts that will be available during the next 6-month period.

When gross business receipts fluctuate to the extent that the preceding 30 days is not an accurate indication of anticipated gross business receipts, use a reasonable period of time and gross business receipts (for example, the last 3 months) to determine current income. A longer or shorter period of time can be used if necessary. Once you have determined the current income, use this amount for the 6-month period unless the unit reports a change.

Changes, once verified, are effective the month following the month the change is reported.

Changing Options:


Participants must be given the option to change their method of self-employment income calculation at recertification.

Participants, who use the 50% of current self-employment income method, may choose the Taxable Income method at the next benefit month.

Participants, who use the Taxable Income method, must continue to use this method until recertification.


MSA:

For SSI recipients, no county action required.

For non-SSI recipients, due to excess income, follow GA.


GA:
Changing Options:


Participants must be given the option to change their method of self-employment income calculation at recertification.

Participants, who use the 50% of current self-employment income method, may choose the Taxable Income method at the next benefit month.

Participants, who use the Taxable Income method, must continue to use this method until recertification, unless there is a Major Change. See MAJOR CHANGE in 0002.39 (Glossary: Lump Sum...). Participants with a Major Change can choose the 50% Method for the next benefit month.

"Current Income using 50% Method" means using income based on the budgeting method used. See 0022.03.01 (Prospective Budgeting – Program Provisions), 0022.06 (How and When to Use Retrospective Budgeting).


GRH:

Follow MSA for aged, blind, or disabled clients. Follow GA for all other adults.

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