Page 11

10

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 his or her 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 or not, nor must all the above factors be met. 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 he or she receives a W-2 form showing wages paid, the employer pays FICA taxes, or the person is paid a salary from a corporation or individual. Some business owners may pay themselves a wage as an employee and receive a portion or all the net profits gained from the business. When this occurs, it is necessary to separate the income received from wages as an employee of the company from the income received from the business profits (or loss).

Self-employment income for MAGI households considers net income. Business expenses should be requested and verified during application process and at redetermination (unless otherwise provided) for all reported self-employment income. 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. 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 the current business records indicates no substantial