The CAO must average profit to find out a individual’s profit from self-employment. The profit is considered gross income and is added to any other gross income that the applicant/recipient group gets. 55 Pa. Code § 181.21
The CAO must figure out the monthly average for profit that a individual gets from self-employment. The CAO can use earlier profit to estimate future profit if the client expects to get the same amount. Income tax forms and other business records may be used as proof of past profit.
55 Pa. Code § 181.22 55 Pa. Code § 181.133 55 Pa. Code § 181.272
Example: Mr. Powell is a self-employed mechanic. His income tax return shows total gross receipts of $12,000 for the past 12 months. His allowable deductions for expenses total $3,600. The CAO figures his monthly profit to be $700 ($12,000 - $3,600 = $8,400 ÷ 12 = $700).
If an individual expects a large increase or decrease in business, the CAO must estimate the earnings the individual expects to get, instead of using the average of earlier earnings.
The CAO must figure out the monthly average for self-employment income that an individual gets under a twelve-month contract if the income is received throughout the year or is meant to cover the year. If the income from self-employment is received during only part of the year, the CAO must figure out the monthly average for the months it is meant to cover.
Examples:
Mrs. Tarbreak is self-employed, selling ice cream and soft drinks at an outdoor pool. The pool is open from June through September. Mrs. Tarbreak usually has a total profit of $900 for the four-month season. The CAO expects the self-employment income to be $225 for each of the four months.
Mr. Williamson is self-employed and travels around the country showing his antique car at car shows. He is under an annual contract with the promotion company that runs the shows. The number of shows Mr. Williamson must go to changes monthly. During the previous twelve months, Mr. Williamson earned $14,100 in profit. The CAO counts a monthly profit of $1,175.
When estimating an individual’s self-employment income, the CAO must do the following:
Record why and how it came up with the amount.
Explain to the individual how the estimated amount was figured.
Tell the individual that he or she must report any change in income by the tenth day of the month after the change.
Updated February 14, 2012, Replacing July 9, 2008