When to require income verification

Verify all included sources of income when:

· Processing an application

· Processing a redetermination,

OR

· A family reports their income is over 85 percent of State Median Income (SMI) during the 12-month eligibility period. See Chapter 7.4 (Verification – 12-Month Eligibility Period).

During a family’s 12-month eligibility period:

· Verification of an income decrease may be requested, but not required, if it could reduce the family’s copayment. See Chapter 7.4 (Verification – 12-Month Eligibility Period). If verification is not received, the family’s eligibility should not be impacted and their copayment should not be reduced.

· A Memo or Special Letter may be sent to the family if it is unknown whether a reported income increase puts the family’s income over 85 percent State Median Income. See Chapter 7.4 (Verification – 12- Month Eligibility Period).

Income that is not counted and does not affect the eligibility or amount of assistance the family will receive does not need to be verified. See Chapter 6.6 (Earned/Unearned Income).

What to request as verification

Request verification that proves when, what type, and the amount of income a family member receives.

A Minnesota Family Investment Program/Diversionary Work Program (MFIP) Employment Plan cannot be used as verification of income.

All income must be verified using the documentation that is the best indicator of future income.

· The recommended standard is the most current 30 days of verification for income other than child support tracked through PRISM.

· If the most current 30 days of income verification is not reflective of expected future income, a different timeframe can be used.

· For child support tracked through PRISM, the recommended standard is the last six months of information.

If the worker uses something other than these standards, it is recommended that they case note why they deviated and how verification is used to support the income components required in the calculation of annualized income.

When documentation cannot be obtained

If the applicant or recipient cannot provide an actual document, ask them to provide a release of information signed by the family member receiving the income allowing you to contact the source of the income directly.

When a client statement can be used to verify income

A client statement cannot be used to verify income except in the following circumstances:

· Self-employment income: If existing verification is insufficient to accurately predict self-employment income (for example in the start-up phase of self-employment), the family must choose the 50% of gross income method (see Chapter 6.15.6 (Annualizing Self-Employment Income)) and a client statement may be used to verify self-employment income.

· Child support income: In cases where there is a previously agreed upon child support arrangement and the absent parent refuses to sign a verification of payment, the applicant may self-declare child support income during the initial application.

· Earned Income Ending: A signed client statement can be used to verify the date that employment ended and the date the last paycheck was received.

Earned income

· Paycheck Stubs

· Ask if the applicant or recipient has paycheck stubs for the timeframe that is the best indicator of future income. The recommended standard is the most current 30 days of verification. If the most current 30 days is not reflective of expected future income, such as for seasonal or temporary income, a different timeframe can be used. The paycheck stubs should specifically identify the number of hours worked, gross income based on those hours, payroll period covered, client and employer name.

· The worker may also use year-to-date totals as the best indicator of future income.

· If something other than the recommended standard is used to calculate the income components, it is recommended that the worker case note what was used and how it was used to determine the income components.

· Employer Statement

· If paycheck stubs are not available, or do not contain all the necessary information, ask the applicant or recipient to provide a letter from the employer on company letterhead with the necessary information. It is recommended that the worker case note what was used and how it was used to determine the income components.

· For seasonal or temporary income, paycheck stubs may not be reflective of expected future income. An employer statement can be used in combination with paycheck stubs to determine expected future income. The worker is not required to use the information on the paycheck stubs when calculating income if the paychecks are not reflective of expected future income. It is recommended that the worker case note what was used and how it was used to determine the income components.

· Multiple Verification Sources

- The worker may use multiple verification sources to determine expected future income. It is recommended that the worker case note what was used and how it was used to determine the income components.

Self-employment income

Documentation of self-employment income must meet the following criteria:

· When the taxable income method is chosen, verification must be an Internal Revenue Services (IRS) tax return, including all related schedules, that has been filed with the IRS for the most recent year.

· From January 1 to the tax filing deadline of a given year, accept an IRS tax return that has been filed with the IRS for the previous tax year if taxes for the most recent year have not yet been filed. After the tax filing deadline, the family can only use the taxable income method if an IRS tax return has been filed for the most recent year, even if an extension has been granted.

· For example, 2023 taxes can be accepted as verification until April 15, 2025, if 2024 taxes have not yet been filed. As of April 15, 2025, if 2024 taxes have not been filed, the family does not have the option to use the taxable income method.

· See Chapter 6.15.6 (Annualizing Self-Employment Income) for more information about the taxable income method and when it can be used.

· When the 50% of gross income method is chosen, verification must show current gross self-employment income.

· The recommended standard for income verification is the most current 30 days of verification. When gross self-employment income fluctuates to the extent that the most current 30 days is not reflective of expected future income, use a reasonable period of time (for example, the last 3 months) to determine current income. A longer or shorter period of time can be used. The amount of time that is reasonable to use may vary for each situation based on factors like the seasonality of a self-employment business.

· A family must verify current gross self-employment income for the 50% gross income method. Documentation must include a detailed record of current self-employment income, such as:

· Business ledgers (actual receipts not required)

· Business income receipts

· Spreadsheet

· Accounting software program report or document showing income

· Handwritten “books”

· Business income receipts

· Client statement that is signed and dated.

· Expenses are not considered in this calculation and do not have to be verified.

· See Chapter 6.15.6 (Annualizing Self-Employment Income) for more information about the 50% of gross income method.

· Self-employment business income records must be kept separate from the family’s personal income records.

· If business records and personal records are not separate, ask the family to separate income records and resubmit according to Child Care Assistance Program requirements.

· If existing verification is insufficient to accurately predict self-employment income (for example in the start-up phase of self-employment), the family must choose the 50% of gross income method and a signed and dated client statement detailing estimated income may be used to verify self-employment income.

· If a self-employed person believes that they should be subject to the state minimum wage, the agency should work with the applicant or client to identify the correct applicable amount. If a self-employed person believes that they should be subject to the state minimum wage but verification is not available, accept a statement from the person that states that they are subject to that amount and the reason why.

Note: If there are concerns about inconsistent information provided for self-employment, the agency may request the family provide additional verification to explain discrepancies. See Chapters 7.3 (Verification – Initial Application), 7.4.3 (Inconsistent Information), 7.6 (Verification – Eligibility Redetermination), and 13.3 (Fraud Referrals).

Tax forms by ownership type

When requesting tax forms from a self-employed person, it is important to know the self-employment ownership type to know what tax forms to request. See Chapter 6.6.5 (Self-Employment Income).

Sole proprietor

· Form 1040

· Schedule C, E or F

Partnership

· Form 1040

· Form 1065 (tax return for entire partnership)

· Schedule K-1 (Form 1065) (each partner’s share of income, expenses, and credits). Each partner uses their K-1 (Form 1065) to complete their 1040.

S Corporation

· Form 1040

· Form 1120 (tax return for entire S Corporation)

· Schedule K-1 (Form 1120-S) (each shareholder’s share of the income, expenses, and credits). Each shareholder uses their Schedule K-1 (Form 1120-S) to complete their 1040.

Unearned income

· All counted unearned income must be verified using documentation from a timeframe that is the best indicator of future income. The recommended standard is the most current 30 days of verification, excluding child support tracked through PRISM.

· For child support tracked through PRISM, the last six months of information is the recommended standard.

· For child support that is not tracked through PRISM, the recommended standard is the most current 30 days of verification.

· If the worker uses something other than these standards to calculate the income components, it is recommended that the worker case note what was used and how it was used to determine the income components.

Unearned income verification examples

Examples of acceptable documentation of unearned income include but are not limited to:

· Court documents providing child support and/or spousal maintenance amounts.

· Documentation from the Child Support and Collections office. In cases where there is a previously agreed upon child support arrangement and the absent parent refuses to sign a verification of payment, the applicant may self-declare child support income during the initial application but must agree to cooperate with child support enforcement by completing the required paperwork. The self-declared child support received is included in the annualization of income.

· Award letters from the Social Security Administration, the Veterans’ Administration, etc.

· State Verification Exchange System (SVES) interface screen prints. See Chapter 7.24 (Verification – State Systems).

· Bank statements indicating interest paid on a specific account.

· Copies of checks for pensions, trust funds, annuities, unemployment compensation, etc.

· Cash settlements/awards/winnings may be verified through copies of the “letters of award” or court order or other applicable items.

· A screen print of the TPCO screen in MMIS or a copy of Your Health Insurance is Cost Effective (DHS- 3767E) (PDF) as verification of cost effective insurance reimbursement.

Income deductions

Request verification of the amount and type of expense and allow the required amount of time for the verification to be returned. See Chapter 7.1 (Verification Due Dates). If the requested verification is not received, do not allow the expense as a deduction and process the case without the income deduction. The following are examples of acceptable verification:

· Payroll deductions as indicated on the pay stubs. Request consecutive pay stubs to verify that the deduction is ongoing.

· Copy of invoice and receipt of payment from an insurance company. The documentation provided must verify the amount and type of expense covered.

· Copy of current invoice for Minnesota Care premiums.

Legal authority

Minnesota Statutes 142E.01, subd. 18
Minnesota Statutes 142E.03
Minnesota Statutes 256P.06
Minnesota Rules 3400.0020, subps. 18 & 40e
Minnesota Rules 3400.0040, subps. 3 & 4a
Minnesota Rules 3400.0180, subp. 3