Self-employment income is money gotten from providing services or selling goods when the person is not an employee of another. Tax and Social Security payments are the person's responsibility.
The following guidelines are used during the process of documenting and verifying gross receipts, determining allowable expense deductions, and determining the type of bookkeeping used by the client.
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Question to Ask |
What to Look For |
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Are business funds mixed with personal funds? |
Business income and costs identifiable as separate from personal expenses are allowed as deductions. If cancelled checks are available, they should be examined with accompanying receipts and invoices showing identifiable itemized costs. For income verification, check bank statements and sequentially numbered receipt and invoice records. |
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Are daily or monthly records of income and disbursements kept? |
Same as above. |
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What tax returns have or will be filed? What tax year is being used? |
Get specific tax schedules (i.e., Schedule C, K, or 1065) showing business deductions and quarterly returns. NOTE: The 1040 line entry relating to business loss or profit cannot be used, as it incorporates deductible business expenses not permitted by SNAP regulations. |
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For partnerships, is there a contract defining structure? |
Get copies of agreements that show the proportionate shares of partners. |
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If the business is named other than with the owner's name, is the business registered with the Pa. Dept. of State Corporation Bureau? |
Document all parties involved. The Corporation Bureau documents all parties involved in the business. |
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Is there a federal or state tax number? |
Get confirmation of parties involved who have access to funds. |
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Is a separate checking account maintained for business? |
Get cancelled checks with accompanying receipts and invoices showing identifiable itemized costs. |
Reissued March 1, 2012, replacing July 13, 2004