Page 337

3410.05.00 DEFINITION OF SELF-EMPLOYMENT

The determination of whether an individual is self-employed will generally be verified by federal income tax returns and there is no need to further question the existence of a trade or business. However, in some instances, it may be necessary to inquire further into the situation to determine if a person is self-employed when tax returns are not a definitive measure. Consider the following when determining that a person is self-employed: • The good faith intention of making a profit or producing income as a regular occupation; • The holding out to others as being engaged in a business of selling of goods or services; • The continuity of operations or regularity of activities; • The lack of an “employer” relationship in the regular sense of the word in which the employer pays wages and or provides benefits; • The existence of documentation in the person’s possession that supports their claim of self- employment; • Being a member of a business or trade association;

A single factor is not always sufficient to determine whether a person is self-employed, nor must all the above factors be met. Eligibility workers must apply the factors listed, as well as others that may exist, to determine whether an income producing activity is self-employment. In some cases, it may be necessary to distinguish self-employment from a hobby. Also, persons working as contractors or subcontractors may or may not be self-employed.

A person is not self-employed if they receive a W-2 form showing wages paid, the employer pays FICA taxes, or the person is paid a salary from a corporation or business entity.

The net profit from self-employment income may be determined through a review of past books or records of the previous year's Federal Income Tax Report. The method of determining the net profit is to be documented in the case record.

IRS regulations are not used in all programs in determining whether a given expense is deducted as an expense in the calculation of self-employment income. (Not all the expenses listed on tax returns can be allowed as self- employment costs for all programs when a self-employed individual files an income tax return.) 3410.10.00 ESTABLISHING ANNUAL SELF-EMPLOYMENT INCOME

Current income from self-employment may be determined by using the individual's tax return filed for the previous year if a review of their current business records indicate no substantial variance. If the previous year's tax return is not an accurate reflection of current income, their recent records are to be used to project the annual income.

When the individual is engaged in a new business, they must supply business records for their taxable year-to-date and annual income is to be projected.

If the individual is engaged in a new business and records are not yet available, or if the business has operated without records, annual income is determined using the individual’s best estimate.