Self-employed people are those who are responsible for their own work schedule and do not have coverage under an employer's liability insurance or workers' compensation.
Self-employed people generally work for themselves rather than an employer. However, people employed in some types of services may be self-employed even if they have an employer or work out of another's business location (for example: real estate sales people, people who work for commission sales, manufacturer's representatives, independent contractors). Self-employed people may or may not have FICA deducted from the check an employer or another party issues to them. When self-employed people indicate they are independent contractors, check with the business the self-employed client is contracting with to see if it considers the client to be self-employed or an employee. If the business states that it considers the self-employed person to be an independent contractor, then the client is self-employed.
Self-employed people may own a business solely or in partnership. In partnerships and S-Corporations people may earn a salary.
Information may also be found in the Self-Employment Handbook.
For treatment of income from specific types of self-employment businesses, see:
Use tax forms and business records to determine income and expenses from self-employment. See 0010.18.09 (Verifying Self-Employment Income/Expenses) for information on how to verify self-employment income.
Determining gross earned income from self-employment differs from determining other gross earned income. Subtract allowable costs of doing business from gross receipts. The amount remaining is the gross self-employment income. See:
Add gross self-employment income to other earned income to determine total gross earned income for the client. For programs with a gross income limit, count gross self-employment income toward the gross income limit. For some programs, a loss from a self-employment business can offset other income. See 0017.15.33.18 (Self-Employment Loss Offset). Apply the disregards and deductions to total earned income (from self-employment and other earned income) to determine net income. See 0018.06 (Work Expense Deductions), 0018.09 (Dependent Care Deduction), 0018.18 (Earned Income Disregards).
Also see 0017.15.33.03 (Self-Employment, Convert Inc. to Monthly Amt).
Determining gross earned income from self-employment differs from determining other gross earned income. Subtract allowable business expenses from gross income. See 0017.15.33.06 (Self-Employment Common Business Expenses). The amount remaining is the “net gross” self-employment income. Do not count draws for assistance unit members as self-employment income because wages or other benefits paid to a unit member or another member of the household for whom the employer is legally responsible is not an allowable business deduction.
For MFIP only, see information on using the rolling average in 0017.15.33.03 (Self-Employment, Convert Inc. to Monthly Amt).
C-Corporations are not self-employment businesses. See 0002.09 (Glossary: Calendar Month...) for the definition of C-Corporation.
S-Corporations are considered self-employment businesses. See 0002.59 (Glossary: RSDI...) for the definition of S-Corporation.
Follow MFIP. After the initial DWP determination, exclude any unanticipated income the unit may receive.
Income from a sole proprietorship and/or partnership or S-Corporation income other than wages, draws, guaranteed payments or compensation of officers is self-employment income.
Wages, draws, guaranteed payments, or compensation of officers paid to the business owner or a household member is considered earned income (not self-employment income) when the business is a partnership or S-Corporation.
S-Corporations are considered self-employment businesses. Income received by the shareholders is countable income regardless of whether the individual decides to reinvest his or her income back into the corporation. See 0002.59 (Glossary: RSDI...) for the definition of S-Corporation.
C-Corporations are NOT self-employment businesses. See 0002.09 (Glossary: Calendar Month...) for the definition of C-Corporation.
For SSI recipients, no county action is required. SSA will make all income determinations and adjustments.
For non-SSI recipients due to excess income, follow general provisions.
Use only the income received and expenses paid from the month of application forward, EXCEPT for:
The cost of building an inventory. Allow the cost of inventory as a deduction only at the time of sale. See 0017.15.33.15 (Self-Employment Expenses Not Allowed).
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Follow general provisions for aged, blind, or disabled clients. Follow GA for all other adults.