Self-employment includes, but is not limited to, running one's own business, trade, or profession. Examples of self-employment include providing day care, mowing lawns, shoveling snow, selling products online or out of the home, selling eggs, renting a room in one's home, and providing rideshare services through Lyft or Uber.
NOTE: Monthly payments from an Agreement of Sale from the sale of property is treated as self-employment income. The entire payment of principal plus interest is counted. If the individual continues to make mortgage payments or pay insurance or taxes on the sold property, the costs of doing business can be deducted from the monthly payment.
To identify self-employment, the County Assistance Office (CAO) will determine who is responsible for withholding Social Security taxes and income taxes from an individual’s earnings. If another party withholds taxes for an individual, the individual is not self-employed. If an individual makes their own monthly or quarterly tax payments to the Social Security Administration (SSA) and Internal Revenue Service (IRS), individual is self-employed.
Examples:
A household member babysits a neighbor’s child in the neighbor’s home. The neighbor withholds Social Security and income taxes as an employer. The babysitter’s income is from an employer, not from self-employment.
A household member babysits a friend's child in their own home. The household member, not the friend, is responsible for withholding taxes and making quarterly tax payments. The babysitter’s income is from self-employment.
NOTE: If an individual works for a business that does not withhold and pay the required payroll taxes – often referred to as working “under the table” – the CAO will determine if the individual is an employee or an independent contractor.
Per the IRS, an employee is anyone who performs services for another individual/entity (employer) and the individual/entity can control what will be done and how it will be done. Even when freedom of action is extended to the employee, the individual/entity has the right to control the details of how the services are performed.
An independent contractor is an individual paid for a result and not controlled in what work is done or how it is done. The individual is subject to and must pay their own self-employment taxes.
A statutory employee is an independent contractor who is treated as an employee for tax withholding purposes. While the employer withholds and pays the required Social Security and Medicare taxes for a statutory employee as they would for a regular employee, the statutory employee has the ability to deduct business expenses on a Schedule C form, like a self-employed individual. The statutory employee status is indicated by a checkmark in box 13 of the IRS “Wage and Tax Statement” (Form W-2). Statutory employees include full-time life insurance agents, certain agent or commission drivers and traveling salespersons, and certain homeworkers.
552.21 Ownership of Rental Property
The CAO must count ownership of rental property as a self-employment enterprise. See Section 550.2 and 550.3 to determine if self-employment rental income is counted as earned or unearned income.
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.
If an individual indicates a partnership on the IRS “Schedule E, Supplemental Income and Loss” (Form 1040), the CAO must consider partnership income to be self-employment. See Section 552.5 and Appendix A for instructions on how to enter partnership income.
Updated April 8, 2026, replacing March 1, 2012