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Counting Client Assets

C. Self-Employment Income

11/1/14

1. Self-Employment; General

Self-employment income is income earned from one's own business, trade, or profession, rather than earning a salary or wages from an employer. Clients are considered self-employed if they meet the criteria in this section. Except as noted below, for all programs except SNAP, when a client has established a corporation, determine if the client is self-employed according to the criteria in this section. If a client has more than one self-employment business, the income from each business is determined separately.

See Counting Client Assets policy on corporations.

Except as provided in 461-145-0250(1), a client is self-employed if:

  • Is considered an independent contractor by the business that employs him or her; or
  • Meets at least four of the following criteria:
 
    • Is engaged in an enterprise for the purpose of producing income.
    • Is responsible for obtaining or providing a service or product by retaining control over the work or services offered.
    • Has principal responsibility for the success or failure of the business operation by assuming the necessary business expenses and profit or loss risks connected with the operation of the business.
    • Is not required to complete an IRS W-4 form for an employer and is not required to have federal income tax or FICA payments withheld from a pay check.
    • Is not covered under an employer’s liability insurance or workers’ compensation.
 

Notwithstanding the information above:

461-145-0910

For SNAP and REF, self-employment income, including microenterprise, is counted prospectively to determine eligibility as follows:

For the GA(M), OSIP(M), and QMB programs, self-employment income is considered available upon receipt by a member of the financial group, except it is prorated over the period of work if the duration of the work exceeds one month.

When determining countable self-employment income, use gross receipts and sales, including mileage reimbursements, before costs.

Refer to CCA WG.1 for examples and more information. For non-self-employed clients who have ongoing costs related to employment, such as newspaper carriers, see CCA A.2 on availability of income.

For information on annualizing contracted and self-employment income, see 461-150-0090.

2. Self-Employment; Costs that are Excluded to Determine Countable Income

(1) This section explains how to determine which costs may be excluded from gross self-employment income.

(2) Unless prohibited by (3) below, and subject to the provisions of (4) and (5) below and to 461-145-0930 the necessary costs of producing self-employment income are excluded from gross sales and receipts, including but not limited to:

(a) Labor (wages paid to an employee or work contracted out).

(b) Raw materials and stock (and inventory) used to make a product.

(c) For SNAP only, principal and interest paid to purchase income-producing property, such as real property, equipment, machinery, durable goods or capital assets.

(d) Insurance premiums, taxes, assessments, and utilities paid on income-producing property.

(e) Service, repair, and rental of business equipment (including motor vehicles) and property that is owned, leased or rented.

(f) Advertisement and business supplies.

(g) Licenses, permits, legal, or professional fees.

(h) Transportation costs at 20¢ per mile, if the cost is part of the business expense. Commuting expenses to and from the work site are not considered part of the business expense.

(i) Charges for telephone service that can be verified as a necessary cost for self-employment.

(j) Meals and snacks provided by family day care providers receiving USDA meal reimbursements for children in their care (except the provider's own children). Use the actual cost of the meals if the provider can document the cost. If they cannot document the actual cost, USDA meal reimbursement rates are used.

(k) Materials purchased for resale, such as cosmetic products. For newspaper carriers, this includes the cost of newspapers, bags, and rubber bands.

(3) The following costs are not allowable costs from gross sales and receipts:

(a) Business losses from previous months.

(b) For all programs except SNAP, payments on the principal of the purchase price of income-producing real estate and capital assets, equipment, machinery, and other durable goods.

(c) Federal, state and local income taxes, draws or salaries paid to any eligibility group member, money set aside for personal retirement, and other work-related personal expenses (such as transportation, personal business, and entertainment expenses).

(d) Depreciation. Depreciation is a prorated lessening of value assigned to a capital asset based on its useful life expectancy and initial cost.

(e) Costs related to traveling to another area to seek business when there is no reasonable possibility of deriving income from the trip.

(f) Interest or fees on personal credit cards.

(g) Personal telephone charges.

See rule 461-145-0600 for information on how to treat inventory.

(h) Shelter or utility costs associated with the client's home, except as authorized by section (4) below.

(4) The exclusions for items used for both business and personal purposes, such as automobiles and a residence (including utilities), are limited by the following subsections:

(a) For GA(M), OSIP(M) and QMB, the portion of the expense that is for business use only is excludable;

(b) For SNAP, costs are excludable for a separate office or shop located on the property used as a home, unless the office or shop is part of the dwelling in which the client lives. Costs for other items used for both business and personal use are excludable.

(5) If no member of the financial group has been self-employed for a sufficiently long period to ascertain the costs of self-employment, they may be estimated.

461-145-0920

3. Self-Employment; Determining Countable Income

(1) The Department initially determines gross sales and receipts (before excluding or deducting any costs). This section explains how different programs exclude and deduct costs from self-employment gross sales and receipts.

(2) For SNAP, if there are any costs permitted in CCA C.2 above, there is a deduction of 50% of gross self-employment income.

(3) In the GA(M), OSIP(M), and QMB programs, all costs permitted in CCA C.2 are excluded.

(4) In the REF program, no costs are excluded.

461-145-0930

4. Additional Exclusions for Farming costs; SNAP

In the SNAP program, if gross self-employment income from farming is less than the costs calculated in accordance with 461-145-0920, and the client receives or anticipates receiving annual gross farm income of $1,000 or more, then farming-related costs that exceed self-employment income from farming are allowed as an exclusion from nonfarm self-employment income, other earned income, and unearned income.

461-145-0931

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