SELF-EMPLOYMENT BUDGETING

This section is to be used after review of 0017.15.33 (Self-Employment Income).

For specific types of self-employment businesses that must follow special provisions, see:

●	0017.15.33.24 (Self Employment Income From Farming).
●	0017.15.33.27 (Self Employment Income From Roomer/Boarder).
●	0017.15.33.30 (Self Employment Income From Rental Property).
●	0017.15.54 (Capital Gains and Losses as Income).

The self-employment budget period begins in the month of application or in the 1st month of self-employment.

SELF-EMPLOYMENT INCOME CALCULATION

There are 2 methods for calculating self-employment income:

●	50% of gross income.
●	Income tax forms.

The agency must determine self-employment income using the method the client chooses for each self-employment business.

●	If the client has not filed business taxes with the Internal Revenue Services (IRS) as of the filing deadline for the most recent tax year, the client must use the 50% of gross income method.
●	If the client has not filed taxes for the most recent tax year, they can use the previous year’s taxes up to the filing deadline. For additional information, see the Self-Employment Guide in the Guides and Handouts section.

Document the option the applicant or participant has chosen, all calculations and forms used in case notes.

When a unit has more than 1 self-employment business, calculate the income for each business separately. Losses from any business whose earnings are determined using tax forms offsets the earnings from the other self-employment business. MAXIS will calculate the income.

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50% of gross income: - Gross income are defined as earned income before taxes and deductions. - This method is based on using current income to calculate self-employment income. - Determine gross income using either business records or Self-Employment Report Form (DHS-3336) (PDF) submitted by the client. See 0010.18.09 (Verifying Self-Employment Income). See TEMP Manual TE02.08.192 (How to Code STAT/BUSI for Cash & SNAP Cases).

●

Income Tax Forms Use business income as determined from Internal Revenue Service (IRS) tax forms that have been filed with the IRS for the most recent tax year. If what was filed no longer reflects current or anticipated income, the client must use the 50% of gross income method. Review gross business income using all business tax returns, forms and schedules. See 0010.18.09 (Verifying Self-Employment Income) for examples. - Divide the gross income by 12 (months) to find the monthly average income for the business. - For a new business in operation for less than 12 months, or a seasonal business, divide the gross income by the number of months the business was in operation. Review business expenses listed on the tax forms. The instructions for each tax form provide information on what expenses are allowable under current Internal Revenue Code. Allow expenses that are also allowed by Internal Revenue Code except for the following: - Net losses carried over into additional tax years. Only allow net losses in the original year in which it occurred. - Federal, State, local income taxes, and money set aside for retirement purposes. - Depreciation. - Divide the expenses by 12 (months) to find the monthly average expense for the business. - For a new business in operation for less than 12 months, or a seasonal business, divide the gross income by the number of months the business was in operation. - Subtract allowable business expenses from gross income. This may result in a positive number or a negative number. This is the allowable business income. See TEMP Manual TE02.08.192 (How to Code STAT/BUSI for Cash & SNAP Cases).

Document the gross income and allowable expenses along with 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% of gross income or the income tax forms method for that new program.

See the Self-Employment Guide in the Guides and Handouts section.


MFIP, DWP, GA:
Count self-employment income using the 50% of gross income method based on the program budget cycle. 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 gross income of current self-employment income method, may choose the income tax forms method at the next benefit month.

Participants who use the income tax forms 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% of gross income method for the next benefit month.


SNAP:
For self-employed person choosing the 50% of gross income method, use gross business receipts that accurately indicates anticipated gross income. This means taking into account seasonal work or the fact that new businesses might not show any income. You may need to use a timeframe other than 30 days of business records to determine countable income. See 0022.03.01.03 (Prospective Budgeting – SNAP Provisions).

Changing Options:

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

During the certification period

●	Participants, who use the 50% of gross income method, may choose the income tax forms method at the next benefit month.
●	Participants who use the income tax forms method, must continue to use this method until their next renewal.
●	Participants must be given the option to change their method of self-employment income calculation at their next renewal.

MSA:
For SSI recipients, no county action required.

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


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