An employer is responsible for withholding Social Security and income taxes from an employee’s earnings. To determine whether a person has an employer or is self-employed, the CAO must determine who is responsible for withholding taxes from the person’s earnings and whether the person is operating a business or is providing a service for other individuals or businesses. 7 CFR § 273.9(b)(1)(i)
Examples:
A household member babysits for a neighbor’s child in the neighbor’s home. The neighbor withholds Social Security and income taxes as an employer. The baby sitter’s income is from an employer, not from self-employment.
A household member babysits in his or her own home for a friend’s children. The household member, not the friend, is responsible for withholding taxes and making quarterly tax payments. The baby sitter’s income is from self-employment.
The CAO must count ownership of rental property as a self-employment enterprise. See Chapter 550, Income sections 550.2 and 550.3 to determine if self-employment rental income is counted as earned or unearned income. 7 CFR § 273.9(b)(1)(ii) and 7 CFR § 273.9(b)(2)(ii)
NOTE: Self-employment from renting rooms does not depend on who owns the residence where the households live. When two households share a residence, the situation may be considered sharing expenses or self-employment from renting a room.
Examples:
Sharing expenses: Two households share a residence. Household X pays $550 a month for rent. Household Y pays household X $250 as its share of the rent. The payment made from Y to X is not considered income to household X, because the payment goes to the landlord.
Renting a room: The agreement between households X and Y is that Y pays X for a room. The $250 payment is considered self-employment income for household X.
Reissued March 1, 2012, replacing July 13, 2004