821-1        BUDGETING SELF-EMPLOYMENT INCOME

Budgeting self-employment income is the same for all self-employment circumstances, regardless of whether the self-employment is year round or seasonal.

If the historical self-employment income is representative of the current circumstances or the household can reasonably estimate the income, use the expected adjusted gross self employment income amount and divide it by 12 months.

Examples:

1)  Hank commercial fishes for 3 months out of the year. He expects to make $30,000 net profit.

Countable MAGIModified Adjusted Gross Income Medicaid income:  $30,000/12 months = $2,500/month


2)  Naya drives a cab 1-2 days a week all year. She expects to make $500/month, including tips, after her allowed IRSInternal Revenue Service expenses are deducted.

Countable MAGIModified Adjusted Gross Income Medicaid income:  $500/month

821-1  A.        PROSPECTING SELF-EMPLOYMENT INCOME

Self-employment income is prospected the same way as other income. The countable income is determined using information about the source of income, the amount of income expected to be received from that source, and when and how often the income will be received. A correct estimate of self-employment income and expenses must be reasonable, based on all available information, and include contact with the self-employed individual.

Self-employment income is different from other earned income in several ways:

1)  Self-employed individuals are the primary source of information used in the estimate of income. An estimate of self-employment income needs to come from the self-employed person.

2)  The estimate of income includes consideration of the individual’s history of self-employment earnings, but only as a starting point. The estimate of on-going self-employment income must include documentation of what changes are expected to occur and how these changes have been factored into the estimate.

3)  Changes in expenses, as well as changes in income, are considered. For example, an increase in the price of gasoline may affect the business expenses.

4)  Sources of self-employment and different variables, such as harvesting seasons, tourism, and weather may affect self-employment income. The expected net profit may change due to these variables.

5)  If the self-employment enterprise is new, the self-employed person should make an estimate of what is expected. In some cases, the individual may anticipate no net profit during the startup period.

When all the necessary information has been gathered, subtract the expected allowable IRSInternal Revenue Service deductions for costs of doing business from the expected gross income. The result is the individual’s adjusted gross self-employment income.

821-1 B.        SELF-EMPLOYMENT INCOME CHANGES

Changes in self-employment income are made when a report of change indicates that there is a substantial change in self-employment income (such as fisheries closure or additional openings, breakdown or loss of equipment, or prolonged illness).

Adjustments to self-employment income are made only when more current information and supporting verification becomes available.

If an adjustment is made, the ETEligibility Technician must document the reason for the adjustment, how the adjustment was calculated, and the new anticipated self-employment income amount.