Self-employment is operating one’s own business, trade, or profession. Examples of self-employment include, but are not limited to the following:
55 Pa. Code § 181.92 55 Pa. Code § 181.272
Providing day care.
Running a beauty salon or barber shop.
Mowing lawns.
Running a farm.
Selling Avon products.
Renting property (see Section 350.4 Rental Property Income).
A individual is self-employed if he or she has to report his or her income and business costs to the Internal Revenue Service (IRS) as self-employment (using IRS Form 1040 Schedule C, Profit and Loss from Business, and Schedule SE, Self-employment Taxes). If another individual or company reports the individual’s earnings to the IRS and pays the individual’s Social Security taxes, the individual is not self-employed.
For information about self-employment for MAWD, see Chapter 316, Section 316.22, Employment.
NOTE: If the individual is not reporting self-employment income to the IRS, the CAO must still treat the income as self-employment. However, someone who is not filing a tax return with the IRS may not be able to prove allowable business expenses.
Examples:
Mary Layman provides child care and daytime housekeeping services at an employer’s home. The employer pays Mary $8 an hour, pays the employer share of Social Security, and deducts Social Security and withholding taxes from Mary’s gross pay. Mary is not self-employed.
Margie Duncan provides child care in her home. She gets weekly payments for each of three children whom she takes care of. The parents of the children do not deduct Social Security or withholding taxes from what they pay her. Margie has not reported the income to the IRS and does not keep records of expenses related to providing the care. She shows written statements from the parents to prove the amount she gets for each child. Margie is self-employed, but the CAO does not allow her to take deductions for expenses.
Rental income includes the following:
Rent from nonresident property.
Rent from personal property.
Rent from a room or apartment in one’s own home.
Money from board or from room and board.
For SSI-related categories, income from rental property is treated as earned self-employment income if it is reported to the IRS. If the income is not reported to the IRS, the CAO must count the income as unearned income. (See section 350.41, SSI-Related Rental Property Income) 55 Pa. Code § 181.92
For TANF-related and GA-related categories, income from rental property is treated as earned self-employment income, unless the rental property is managed by a rental agency or other third party. If the property is managed by a third party, the rental income is treated as unearned income. (See section 350.42, TANF/GA-Related Rental Property Income) 55 Pa. Code § 181.288
Updated February 14, 2012, Replacing July 9, 2008