5164-1        DEFINITIONS

5164-1 A.   DEFINITION OF SELF-EMPLOYMENT

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 they:

1. Are responsible for obtaining or providing a service or product; and
    

2. Earn income directly from their own business; and
    

3. Are not required to have federal income tax and FICA Federal Insurance Contributions Act payments withheld from their earnings; and
    

4. Are not required to complete an IRS Internal Revenue Service W4 form for an employer; and
    

5. Are not covered by worker's compensation.

Self-employment may include income from a trade or business, hobby, commercial boarding house, rental property, or other income producing property.  Examples of self-employed individuals include:

5164-1 B.   SELF-EMPLOYED FISHER PERSONS

Owners of fishing boats and individuals holding fishing permits are considered self-employed if they are actively involved in the fishing operation.

Individuals who lease their boat or fishing permit and are not actively involved in the fishing operation are not considered self-employed fisher persons.  In these cases, the income obtained from lease of the boat or permit is considered rental property income.

5164-1 C.   RENTAL INCOME

Rental income is treated as self-employment income when the owner of real or personal property performs the managerial responsibilities, earning the income by his or her own efforts.  When rental income is treated as self-employment income, allowable costs of doing business are deducted from gross rent receipts to determine adjusted gross self-employment income.  

Rental income is treated as unearned income when the owner of real or personal property does not perform the managerial responsibilities for the rental property.  When rental income is treated as unearned income, the countable unearned income is the amount of rent paid by the renter less any property management fees incurred.

Note:  

Real property that produces rental income must be evaluated as a resource first (MS 5152-3).  If a household is resource eligible, rental income counts as explained in this section.

Income received from the lease of a limited entry fishing permit is considered unearned rental income.

Rental income received in a lump sum is counted in the month of intended use.

5164-1 D.   MONTHLY SELF-EMPLOYMENT INCOME

Monthly self-employment income is self-employment income that is, or could be, earned on a monthly basis during any or all months throughout the year.  Examples of individuals with monthly self-employment income include:

Follow the procedures in section 5164-6A for budgeting monthly self-employment income.

5164-1 E.   SEASONAL SELF-EMPLOYMENT INCOME

Seasonal self-employment income is self-employment income that is earned during a specified season or during part of a year.  Examples of individuals with seasonal self-employment income include:

Follow the procedures in section 5164-5 for budgeting seasonal self-employment income.

5164-1 F.   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 costs of doing business are not deducted in determining gross self-employment income.

5164-1 G.   ADJUSTED GROSS SELF-EMPLOYMENT INCOME

Adjusted gross self-employment income means the gross self-employment income less allowable costs of doing business.  To determine adjusted gross self-employment income, subtract the total amount of allowable costs of doing business from the gross self-employment income.  The amount of self-employment earnings countable to a self-employed individual is the adjusted gross self-employment income.

5164-1 H.   SELF-EMPLOYMENT COSTS OF DOING BUSINESS

Self-employment costs of doing business are those declared non-personal expenses incurred by the self-employed individual as a direct result of earning the self-employment income, and which are not specifically prohibited.  If an expense is determined to be an allowable cost of doing business, the expense is deducted in computing adjusted gross income whether it is paid or not.  

Refer to section 5164-2 for more information on costs of doing business.

5164-1 I.    DURABLE GOODS

Durable goods are items of value purchased for use in the self-employment enterprise that are normally used for more than one year or season and can usually be sold once the self-employment business ends.  Durable goods include items such as:

5164-1 J.   PERIOD OF SELF-EMPLOYMENT

The period of self-employment is the number of months in which a seasonally self-employed individual is actively engaged in producing or attempting to produce self-employment income.  The period of self-employment does not include months in which maintenance or preparation of tools or equipment is the only self-employment activity performed.