To determine eligibility at application, the CAO will average the profit received from self-employment over the period that it is supposed to cover. The profit is then added to any other income the budget group received. See Chapter 150, Income, and Chapter 168, Determining Eligibility and Payment Amount.
The CAO will use the best information available to estimate income the budget group expects to receive from self-employment at application or when self-employment begins. The CAO may base the estimate on prior earnings if they correctly represent the self-employment income that the budget group expects to receive. The CAO may use income tax returns and other records.
Example: Mr. Ralston is a self-employed carpenter who works year round. His income tax return shows total gross receipts for the past 12 months of $9000, although he had no earnings for the month of April due to not having work at that time. His allowable deductions for expenses total $3000. The monthly profit would be $500. ($9000-$3000 = $6000 divided by 12 = $500)
If there will be a substantial increase or decrease in business, the CAO will estimate the earnings that the budget group expects to receive instead of averaging past earnings.
Example: Mr. and Mrs. Wetzel own a campground. Last year's tax return shows a total income of $10,000 before expenses. The Wetzel's recently added 30 extra camp sites, built a water slide, and raised site fees by $1. They expect this to increase business by 25%. Rather than averaging last year’s income, the CAO estimates the Wetzel's income before expenses to be $12,500 based on anticipated receipts. When determining estimated profit, the CAO will also consider an anticipated increase in expenses.
If the budget group’s self-employment enterprise has been in existence for less than a year, then average the income over the period of time it has been in existence and project the monthly amount for the coming year.
Annualize (average over twelve months) self-employment income received under a contracted agreement if the income is received throughout the year or is expected to cover the year.
Example: Mr. Sneed has a contract with Saint Patrick's Church to provide lawn services for the year. Mr. Sneed's records show gross receipts of $6,000 and allowable expenses of $2,400. Gross profit is $3,600. The CAO would divide that amount by 12, since the services are for 12 months, and would determine that the monthly profit is $300.
Full-time undertakings such as farming, logging, painting, and the like may be considered enough to support the budget group for the year even though the income is earned seasonally.
Example: Mr. Philips is a self-employed artist. He has worked full-time out of a studio in his home for ten years. His records show gross receipts of $7,500 and allowable expenses of $3,000. Gross profit is $4,500. The CAO determines monthly profit to be $375.
The CAO will average income from self-employment over only the months it is expected to cover if it is received during only part of the year. If a person does different types of work for certain periods of time during the year, the income may be expected to cover month-to-month periods
Example: Ms. Koffee works at Wendy's full-time and adds to her income as a self-employed vendor by selling hot dogs during the local high school home football games from September to November. She usually has $600 profit from self-employment income for the season. The CAO expects monthly self-employment income to be $200 for each of the three months. The profit is prospectively budgeted along with the income she receives from Wendy's.
The CAO will prospectively budget the monthly profit received that has been averaged over the period it is expected to cover.
The CAO will:
Record in the case record the basis for arriving at the estimated income;
Explain to the person how the caseworker arrived at the estimated income;
Remind the person he or she is responsible for reporting all changes;
Explain the semiannual (twice a year) reporting process;
Enroll the person in semiannual reporting; and
Explain work participation requirements.
Reissued September 21, 2012, replacing January 31, 2012; reviewed March 1, 2018