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REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.A.)
For example, if a company pays the a/b’s utility bills and car payment in addition to a weekly salary, the value of the utilities and car payments are countable as wages.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.B.1.)
Unless the a/b is mentally or physically incapable or requests assistance, he must provide verification of income. See 5., below, for acceptable sources of verification.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.B.4.)
Self-employment income is the gross income from a continuing trade or business activity minus the allowable operational expenses for that activity.
Self-employment income also includes any distributive share (profit at the end of the year) from a partnership, whether or not the income was actually distributed. See 2.b., below, for income from partnerships.
Self-employment income may be received annually (such as farming), or it may be received monthly (such as rental income), or it may fluctuate (such as a lawn care business).
An individual is self-employed when he is working in his own business, trade or profession rather than working for an employer. Self-employment income includes but is not limited to farm income; rental income; roomer/boarder income; income from a solely operated business; income from a trade such as a carpenter or a cosmetologist; income from a partnership; and income earned by an individual working as a consultant or independent subcontractor.
To determine if an individual is self-employed, evaluate the individual’s work situation. If an employer is withholding Social Security and income taxes, the individual is not self-employed. A self-employed individual generally exercises control over how the business will be conducted, not just the end product. Also, a self-employed individual usually incurs operational expenses related to conducting his business or work activity.
For example, a carpenter who works for a construction company, has materials provided, and receives a regular paycheck with taxes withheld is not self-employed. A carpenter who is self-employed solicits his own work, works on various jobs, provides his own tools and is paid when the job is finished with no taxes withheld.
An a/b who babysits in another person’s home is an employee of that person. An a/b who babysits in her own home is self-employed.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.)
The following is an overview of the possible types of business arrangements encountered with a/b’s who have income other than regular wages. Some but not all of these are treated as self-employment income for Medicaid purposes.
For example, a painter’s gross receipts for the 12 month base period are $53,000 and her operational expenses are $28,500. She has withdrawn from her business account $350 per week in the same period for a total of $18,200. Her gross income from the business is $24,500, the difference between receipts and expenses, rather than the amount she withdrew.
For example, two individuals work together as equal partners in a lawn care service. Their gross receipts in the base period were $63,000 and their operating expenses were $12,000. The gross income from the business is $51,000 and each partner’s gross income is $25,500.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.2.b.)
NOTE: A Professional Association (PA) is a corporation.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.2.d.(3))
If the income the a/b draws from the business does not appear reasonable or sufficient to meet his living needs, explore the possibility that funds are being used from the business accounts to pay personal expenses.
For example, the recipient owns a used record store with his brother and the business is incorporated. He states he only receives $100 per week salary. The caseworker learns that he also writes checks out of the business account to pay his car payment and car insurance and his rent. This is considered in-kind wages and is countable.
Some small businesses incorporate as an S Corporation. This is a special tax status, which operates the same as a partnership in that the income is taxed at the individual level and there are no corporate taxes. For self-employment income purposes, treat individuals in an S Corporation the same as partners in XI.C.2.b.
The primary source of verification of self-employment income is the business records of the business, if available. This may include but is not limited to the following:
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.3.a.)
For example, application is made on 4/01 and the base period is 10/00-3/01. The tax records from tax year 2000 indicate gross receipts before expenses of $36,000. The monthly average is $3,000 per month. This is the monthly average for 10/00-12/00. The a/b states there has been no change, so $3,000 per month may be projected for 1/01-3/01.
In this same example, the caseworker cannot use tax records from tax year 1999 because none of those months are included in the base period.
NOTE: Refer to X.C.4.c.(4) for procedures for using tax forms to average operational expenses.
At application, the applicant’s statement of income may be accepted AS A LAST ALTERNATIVE only if no business or current tax records are available and the applicant has not previously been informed of the requirement to keep business records. Applicant’s statement is acceptable for gross income receipts only, not net receipts after operating expenses. The applicant’s statement cannot be accepted for operational expenses. If you must accept the applicant’s statement of gross income:
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.3.b.)
This review is optional to the county. Do not terminate assistance if the recipient does not provide requested information. However, the recipient may be terminated at the end of the 6/12 month c.p. if he does not provide the requested information for the regular review. The purpose of this income review is to encourage the recipient to keep adequate records to establish eligibility.
A deduction from the gross income receipts of the business is allowed for the ordinary and necessary expenses required for the operation of the business. Specifically excluded are expenses allowed by the IRS, such as depreciation and amortization, which do not reflect the actual income available to the a/b to meet living expenses.
Operational expenses should be carefully reviewed to determine the actual level of income available to the a/b. In most cases this will differ from a determination of allowable deductions and business income for tax purposes.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.4.)
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.4.c.)
Using the same example used for gross receipts in X.C.3.a. (4) above, application is made in 4/01 and the base period is 10/00-3/01. The tax records from tax year 2000 indicate allowable operational expenses of $12,000. The monthly average is $1,000 per month. This is the monthly average for 10/00-12/00. The a/b states there has been no change, so $1,000 per month may be projected for 1/01-3/01.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.4.)
Value Table for Food Expense
Add $43 for each additional person
Example: A boarder eats one meal a day or 1/3 of his meals per month with client and client’s spouse. Divide the food allowance for 3 by 3. Subtract this amount from the amount paid for board as an expense.
Example: A babysitter keeps a child 22 days/month and feeds the child 2 meals/day (44 out of 91 meals/month) or 48%. The needs unit is 4 plus the child = 5, food value per person is $62. The total allowable expense is $62 x 48% = $29.76.
REISSUED 11/01/12 - CHANGE NO. 13-12
(XI.C.4.)
NOTE: The only exception is when the vehicle is used for hire, such as taxis, limousines, buses and vans. For vehicles used for hire, only the actual costs of operating the vehicle may be deducted as an operational expense.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.4.f.)
Example 1: Sole proprietor of a flower shop owns a van in her name which is used primarily for delivering flowers but is also used for occasional personal travel. She drove 20,000 miles during the base period and states that 16,000 were for delivering flowers. She can claim a mileage allowance for the 16,000 miles related to the business activity, or she may claim 80% of actual costs for which she has receipts.
Example 2: Married couple with a turkey farm own a truck registered in both names and it is their only vehicle. They state they use the truck both for farm work and as their private vehicle. They have no mileage records but they have receipts for gas, oil, tires, and repairs. They state that approximately 50% of the mileage is related to farm work, mostly picking up supplies and providing transportation for laborers. They may claim 50% of the actual costs as an expense.
For example, the primary work of a painter is painting. The other tasks, such as buying supplies, preparing written estimates and sending invoices, are secondary.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.4.g.)
NOTE: Mortgage payments are not an allowable expense for home offices as they are considered a capital expenditure.
NOTE: This rule applies for deducting telephone expenses even if the a/b cannot claim a deduction for the business use of the home.
For example, if the total area is 1,200 square feet and the room used for the business is 240 square feet, 20% of the home is used for business. Therefore 20% of the utilities may be allowed as an operational expense.
In another example, the home has four rooms and one room is used for the business. Therefore 25% of the utilities may be allowed.
Example 1: Self-employed plumber has a room in his home which he uses exclusively as an office to phone customers, order supplies, keep books. He has a part-time secretary who also uses the office. He spends approximately 35 hrs/week in his customers’ homes installing and repairing plumbing and 10 hrs/week in the office. His office is not where he does the primary work of his business and the expenses for the space in his home are not allowable. However, he may still deduct the cost of supplies, the labor costs for the secretary and other costs related to operating the business.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.4.g.(5))
Example 2: Transcriptionist has a room in her home used exclusively as an office where she does her transcription on a computer, contacts customers by phone, prepares invoices, keeps business records, and mails advertising brochures. She spends 25-30 hrs/wk in the office and 6-8 hrs/wk picking up and delivering materials to be transcribed. The office is her principal place of business and the expenses are allowable.
If the a/b is involved in more than one self-employment enterprise, determine income as follows:
NOTE: Do not allow the same operational expenses more than once. For example, if the a/b rents a space and uses it for two businesses, the rent may only be allowed once.
For example, a recipient operates a lawn care business for most of the year. During the off-season he does plumbing installation and repair. These are two separate business activities. The total gross income in the base period from the lawn care business is $43,050 and from the plumbing business $12,140 for a total of $55,190. His operational expenses from the lawn care business are $16,650 and $3,450 from the plumbing business for a total of $20,100. His gross countable income from self-employment is $35,090 (55,190 - 20,100).
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.)
If there are conflicting records/statements, attempt to resolve the difference. If it cannot be resolved, use the lowest verified amount.
If the business or activity is being discontinued, do not include the self-employment income from the base period in the income calculation for the upcoming c.p. Include as reserve any remaining portion of the total available net proceeds from the business.
For Medically Needy cases, if the business or activity is to be continued but no profit is realized due to temporary circumstances beyond the control of the a/b, do not consider the property value in reserve. (Business assets are always countable in Categorically Needy cases.) Refer to MA-3320, Resources, for procedures for treatment of excluded property no longer producing income.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.10.a.(2))
For example, a hog farmer receives a $15,000 payment. He signed an agreement that 60% of his payment ($9,000) is paid directly to Carolina Bank who holds a mortgage on his hog houses. The remaining 40% ($6,000) is paid directly to the farmer. However, the countable gross income is $15,000.
These are annual payments to farmers from the federal government based upon contract acreage for production of certain feed/grain crops. Treat these payments as self-employment income. The payment is included on the farmer's tax returns, along with operational expenses. This is annualized income. Divide the net annual income after expenses by 12 to calculate the countable monthly income.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.10.c.(1))
Example: Applicant owns 1/3 interest in undivided heir property with his 2 brothers. It is farm property that is rented for $600/month after operational expenses. 1/3 of the net rental received, or $200, is countable income applicant. He reports he receives 1/2 the income, or $350, from the property because he helps manage the property. Count $350 as income.
If a minister files taxes as a self-employed person, determine gross income as follows:
NOTE: If the church provides a house for the minister, the current market value of the monthly expense for the house (rent or mortgage payment) is considered income unless living in the house is a condition of employment.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.C.)
Definition - Payments by a county that exceed the state maximum rates or exceed the rates set by the county
Count the full amount of the supplemental payment as gross income.
Definition - Benefits resulting from loss of employment due to injury on the job.
REVISED 10/01/11 - CHANGE NO. 13-11
(XI.E.)
For questions or clarification on any of the policy contained in these manuals, please contact your local county office. |
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