5164-4        ESTIMATING SELF-EMPLOYMENT INCOME

Self-employment income is estimated the same way as other income, using the policy at MS 5160-1.  Working with the self-employed person, the caseworker reviews the self-employment earnings history and considers what is likely to change in the future. The estimate is made 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:

• Self-employed individuals are the primary source of information used in the estimate of income. An estimate of self-employment income cannot be made without talking to the self-employed person.
   

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

• Changes in expenses, as well as changes in income, are considered. For example, an increase in the price of gasoline may affect both monthly self-employment (taxi drivers) and seasonal self-employment (fisherperson).
   

• The type of changes and the number of factors that may affect self-employment income is greater than for regular employment situations. The caseworker will need to develop familiarity with a variety of local conditions that impact different types of self-employment. For example, the expected volume of tourism in a community might influence the estimate of income for taxi drivers, tour operators, and charter boat businesses.
   

• Particularly for seasonal self-employment such as fishing, information from other sources, such as the Department of Fish & Game and processors, is necessary to understand what is likely to occur. The predicted strength of a run, the expected prices that will be paid, and the length and timing of openings all affect the estimate of income. Information about when the self-employment income will be available determines the budgeting of the income.

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

Note:

If the self-employment enterprise is new, use the estimate provided by the self-employed person. In some cases, they may not anticipate receiving any countable income during the start-up period.  Caseworkers should review the situation with the self-employed individual at the time it is anticipated the enterprise will begin producing income.