Self-employment is the process of actively earning income directly from one's own business, trade, or profession. A person is considered self-employed if the person:
1) is responsible for obtaining or providing a service or product; and
2) earns income directly from his/her own business; and
3) is not required to have federal income tax and FICA payments withheld from the earnings; and
4) is not required to complete an IRS W4 form for an employer; and
5) is not covered by worker's compensation.
Self-employment income may come from, but is not limited to, a trade or business, hobby, commercial boarding house, fishing, rental property, or other income producing property.
Gross Self-Employment Income: Gross self-employment income means the total amount of money the trade or business produces. Gross self-employment income is computed by totaling the gross business receipts (income) for the business enterprise. Allowable IRS adjustments, business costs, are not deducted in determining gross self-employment income.
Adjustments/Allowable Business Expenses: Expenses, depreciation, and business losses that are allowed by the IRS.
Adjusted Gross Self-Employment Income/Net Profit: Adjusted gross self-employment income means the gross self-employment income minus IRS adjustments, or allowable business expenses that are claimed. To determine adjusted gross self-employment income, subtract the total amount of allowable business expenses from the gross self-employment income. This amount is the adjusted gross self-employment income and is used as the countable income for MAGI Medicaid. This bottom-line net income is reflected on line 31 of Schedule C (Profit or Loss from Business) and line 34 of Schedule F (Profit or Loss from Farming). Other terms commonly used include the following: net profit; income minus costs of business; expenses; and IRS adjustments.
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