Self-Employment

 

Self-Employment Determination

In general, self-employed individuals:

 

During the interview, the amount of hours the client worked must be reviewed and entered into BEACON to properly screen for ABAWD Work Program Requirements.

Rental, roomer, and boarder income types are treated as self-employment for SNAP purposes. Rental, Roomer, and Boarder Income

 

Important

SNAP only clients who are paid in cash but have no business expenses are not considered self-employed. Income received in these situations must be entered as wages in BEACON

 

 

 

Self-Employed

Employee

Work Rules

Set by self-employed individual

Set by employer

Work Hours

Set by self-employed individual

Set by employer

Payment

By the job

By the hour or time worked, even if the job is not completed

Federal/State Taxes, FICA

Not withheld from pay-self-employed individual pays

Employer withholds from pay

Number of clients/employers

Set by self-employed individual

One employer

Location

Multiple or owned by self-employed individual

Set by employer

Risk

Assumed by self-employed individual

Assumed by employer

 

Self-Employment Ownership Types

Sole Proprietorship

 

Partnership

Two or more proprietors have control over the business and contribute money, property, labor or skill to it, and share in the profits and losses of the business

There are three types of partnerships:

 

General Partnership

Limited Partnership

Limited Liability Partnership

 

Limited Liability Company (LLC)

 

Determining Monthly Income for SNAP Calculation

To determine the monthly income for SNAP households with income from self-employment enterprises, the monthly net self-employment income must be added to any other earned income, or in the case of unearned rental income, to other unearned income received by the household.

If the cost of producing self-employment income exceeds the income derived from self-employment as a farmer, the losses must be offset against any other countable income in the household, provided that the:

 

Determining Eligibility and Benefit Level

For the period of time over which self-employment is determined, add all gross self-employment income (including capital gains), exclude the allowable costs of producing the self-employment income, and divide the self-employment income by the number of months over which the income will be averaged.

 

Anticipating Self-Employment Income

For households whose self-employment income is not averaged but is instead calculated on an anticipated basis:

Self-employment income that is intended to meet the household's needs for only part of the year must be averaged over the period of time the income is intended to cover.

 

Example

Self-employed vendors who work only in the summer and supplement their income from other sources during the balance of the year must have their self-employment income averaged over the summer months rather than a 12-month period.

If a household's self-employment enterprise has been in existence for less than a year, the income from that self-employment enterprise must be averaged over the period of time the business has been in operation and the monthly amount projected for the coming year.

 

Averaging Self-Employment Income

Self-employment income that represents a household’s annual support must be averaged over a 12-month period, even if the income is received in a shorter period of time than 12 months. This income must be annualized even if the household receives income from other sources in addition to self-employment.

 

Example

Self-employment income received by farmers must be averaged over a 12-month period if the income is intended to support the farmer on an annual basis. This self-employment income must be annualized even if the household receives income from other sources in addition to self-employment.  

 

Allowable Costs of Doing Business

Allowable costs of doing business include, but are not limited to, the identifiable costs of:

 

Important  

When entering mortgage principal as an allowable expense, select Other as the Expense type to ensure the amount is included in the benefit calculation. The expense type, entitled Mortgage Principal has not been coded in BEACON to be countable and must not be used when attributing this allowable expense to a household.

 

Expenses Not Allowed as a Cost of Doing Business

For SNAP only clients, expenses not allowed as a cost of doing business include but are not limited to:

Note

When determining expedited eligibility for households with self-employment income, the averaged or prorated monthly self-employment income amount minus the allowable costs of doing business must be used.

 

Capital Gains as Income

Capital Gains is the gain the household makes from the sale of a capital asset, such as real property used to carry out the household’s business enterprise, in excess of the value of the property or cost of the property.

The proceeds from the sale of capital goods or equipment related to the business must be included when determining self-employment income. Even if only 50% of the proceeds from the sale of capital goods or equipment is taxed for federal income tax purposes, the full amount of the capital gain must be counted as income for SNAP purposes.

 

Determining Partnership Income

Partnerships file the IRS form 1065 U.S. Return of Partnership Income. The 1065 form is the profit and loss of the entire business and cannot be used for the individual’s portion of profit and loss.

The Schedule K-1 (1065) is also filed by the business and submitted with the form 1065. The Schedule   K-1 (1065) shows each individuals share of the total profit and loss.

You must determine what the client’s portion of the total profit and loss is and enter as a self-employment record. You must enter the gross income, any allowable business expenses, and leave a detailed narrative explaining the action taken.

 

Important  

All partners in a SNAP household must verify their percentage of the profit and loss. It must not be assumed that two partners each own 50% of the business. Further, it cannot be assumed that two partners split the profit and loss of the business 50/50.

 

Self-Employment Examples 

Cash Income

Kwame babysits for his neighbor Jill for 20 hours a week and makes $12 per an hour. He incurs no business expenses to watch Jill’s child. Kwame is paid in cash and does not receive a W-2 or 1099 form for tax filing purposes.

Based on the case details, Kwame is not considered self-employed. He is paid in cash and does not incur any business expenses. Therefore to verify his income, he must submit a letter from his employer Jill verifying his gross income, the amount of hours he works, and the frequency the income is received.

 

1099 Income

Chad is a driver for Uber. He receives a 1099 form each year for his gross income. He incurs business expenses and keeps a personal record of them.

Chad is considered self-employed for SNAP purposes. He must supply business records that verify his gross income and may provide optional business expenses. You must review the expenses to determine whether there are any expenses that are not allowed as deductions for SNAP. If there are expenses meeting those criteria, you must not give credit for them.

 

Note

For Uber and Lyft specifically, drivers may receive a 1099-K and/or a 1099 MISC depending on the amount of income earned. This may also vary if the driver received non-driving income types such as bonuses or referral fees.  

 

Allowable Expenses

Melissa is a self-employed realtor and her business is not a part of her home. You receive Melissa’s Schedule C and see that she is claiming the following line item expenses: depreciation, meals and entertainment, utilities, and supplies.

You must:

 

Self-Employment Policy and Procedures

 

 

  Last Update: June 29, 2018