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Self-Employment Income
The amount the client enters or provides on the application should be the net taxable income from self-employment activities, which is the amount after applying expenses and deductions permitted by the IRS. IRS rules for determining taxable net profit income from self-employment may result in a negative number (a net income loss). The negative number may be used to offset other income the household reports on their application and, may result in zero countable income for MAGI MC. If the self-employed expenses exceed the self-employment income, CalSAWS will send a negative number to CalHEERS.
The amount that is entered on the SSApp is the amount that should be transmitted to CalHEERS the Federal Hub will determine whether that amount is reasonably compatible. If it is not determined to be reasonably compatible, paper verifications of income must be provided (i.e. IRS Form 1040, Schedules C, E, K-1, etc.)
The IRS rules are different from the rules for determining net income from self-employment for Non-MAGI eligibility. The IRS deductions for MAGI MC are broader than those allowed for Non-MAGI MC net income from self-employment and rental property calculations.
Self-employment income is typically verified using the prior year’s tax documents, however, if the client is unable to provide the tax documents or states that the tax documents from last year do not accurately reflect the current year’s income, they must provide verification of their income and expenses from the last three months. The Eligibility Worker must average the three months of income and expenses and use the resulting amount as the monthly income/expenses in CalSAWS.
Combo Cases
When an individual on a combo case is self-employed, the rules of the other programs must be used, rather than the information outlined above.
Related Topics
Unconditionally Available Income