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104.85 Shelter Portion of a Farm
Shelter Costs Other Than Utilities
If a household's home is on property connected to property used for farming, the case manager must determine if the shelter costs (e.g. rent or mortgage) and the self-employment costs can be separately identified.
Proration may be used to separately identify costs based on information from a mortgage lender, real estate tax records, Farmers Home Administration documents, insurance premiums, etc., and the home ratio may be applied to taxes and insurance costs if better information is not readily available.
If the costs of rent or mortgage, insurance, taxes, and interest cannot be separated, no self-employment exclusion for insurance, taxes, or interest on the mortgage payment may be allowed, and no portion of the mortgage payment, taxes, or interest may be allowed as shelter costs.
If the farmer uses a room or a separate apartment in his or her house or residence solely for the farm operation, the case manager may on a case-by-case basis:
Include all costs (such as rent, mortgage, taxes, and insurance) that the household is required to pay to live there as household shelter costs; or
Exclude part of the costs as self-employment costs and part as shelter costs, provided that no costs are allowed as both self-employment costs and shelter costs. The self-employment costs may be separately identified based on the number of rooms, square feet, etc. If separately identified, only the portion attributed to the household's living space can be included in shelter costs. No portion of the principal attributed to the self-employment enterprise under this option is allowed.
Utilities:
If a farmer's home is on property connected to property used for farming, the case manager must determine if the shelter costs and self-employment costs can be separately identified. Utility costs for a barn are often metered separately from the home, and the cost of a telephone is the same as for other households.
If utilities are measured and billed separately, the household is entitled to the Standard Utility Allowance (SUA) or actual utility costs for its residence and to the separately billed self-employment costs as a cost of doing business.
104.85 Shelter Portion of Farm (continued)
If the utility costs cannot be separately identified, the household may not claim actual utility costs. As part of its shelter costs, the household is entitled to SUA if it incurs out-of-pocket heating and cooling costs for the home separately from the rent or mortgage or it receives a Low Income Home Energy Assistance Act (MEAP) payment.
If the farmer uses part of his house, such as a separate room or a separate apartment solely for the farm enterprise and there is a central meter, the case manager on a case-by-case basis must:
Allow the household either the SUA or the total actual utility costs for the house as shelter costs, but no self-employment exclusion; or
Allow the household to claim actual utility costs prorated between shelter costs and self-employment costs. The SUA cannot be used under this option.
104.86 Garnishments and Bankruptcy for Farmers
Garnishments have no effect on the treatment of self-employment income, i.e. the total gross amount is counted in the income computation. The amount garnished is not an income exclusion.
The self-employment income of farmers who have declared bankruptcy is computed the same as the self-employment income of other farmers. There are different types of bankruptcies.
Some allow people to continue to do the same kind of business and others do not. If the person continues to earn self-
employment income, the gross amount minus allowable expenses are counted.
Sometimes the total amount of income goes to a trustee, and from this amount, he pays the bills and gives the farmer a living allowance. This living allowance is not counted as income because it would result in double counting. No exclusion is allowed for the fees of a trustee or conservator for his services.
In other situations, all of the money goes to the farmer, but he must pay a set amount to a court-appointed person for back debts. This amount is not allowed as an exclusion. An exclusion is allowed only for certain costs in the year in which they are billed or otherwise become due. The household is not entitled to a double exclusion.
Paying off a loan
If a farmer sells equipment and uses the proceeds to pay off a loan, the money is income to the farmer.
If he or she sells equipment and the proceeds are diverted to a bank to repay a loan, the money is counted as income to the farmer.
If he or she voluntarily turns over collateral to a bank, and the bank sells the collateral to pay off a loan, the proceeds of the sale are not counted as income to the farmer. Once the collateral is turned over to the bank, it becomes the legal property of the bank.
If a farmer holds the title to property and sells the property, any proceeds from the sale are counted as income to him/her.
If the farmer gives the title to the bank or if the property is repossessed prior to sale and the bank sells the property, the proceeds are not counted as income to the household.
If a lender is unable to collect on a farm loan, the lender may write all or part of it off or "forgive" the outstanding balance. The forgiven portion is not counted as income to the household.
104.87 Farm Losses Offset Against Other Income
If the costs of producing self-employment farm income exceed the gross farm income, such losses are offset against other countable income.
To qualify for this offset, the person must receive or anticipate receiving annual gross proceeds of $1,000 or more from the farming enterprise.
Monthly net farm self-employment income is computed in the normal manner by taking gross income, subtracting allowable exclusions, and prorating the result over the period the income is intended to cover (usually 12 months). If there is a monthly net farm loss, the offset is made in two phases.
Phase I. The monthly farm loss is offset against the total amount of other net self-employment income computed for that month.
Phase II. If other net self-employment income is not enough to cover the farm loss, the remainder of the farm loss is offset against the total other earned and unearned income for that month. If there is still a net loss, the household is certified based on zero net income. The monthly excess loss is not carried forward to subsequent months.
A fisherman is equivalent to a self-employed farmer for purposes of the offset provision if the fisherman is self-employed, rather than an employee, and the fisherman receives or anticipates receiving annual gross proceeds of $1,000 or more from fishing. This applies even if the fisherman is only involved in catching or harvesting the fish. This applies to watermen as well as to other fishermen.
104.88 Specific Types of Payments
Following is guidance for the treatment of specific types of payments:
A Federal gasoline tax credit is excluded from income. (It is a credit against tax liability.)
A State gasoline tax refund is excluded from income on the basis that it is a nonrecurring lump-sum payment. The Federal gasoline tax credit and the State gasoline tax refund may be combined on the same line of the tax form.
Patronage dividends are reported on tax forms. They are paid by cooperatives in cash or shares of stock. These dividends are similar to rebates paid based on the amount of goods bought or services used for the self-employment enterprise. Cash dividends are counted as self-employment income. Dividends in the form of stock are considered a resource for non-categorically eligible households.
Payments received as royalties are counted as unearned income.
Income from rental property is self-employment income.
Disaster assistance payments made as the result of a presidentially declared major disaster or presidentially declared emergency are excluded from income and resources. This applies to Federal assistance provided to persons directly affected and to comparable disaster assistance provided by States, local governments, and disaster assistance organizations.
104.89 Earned Income Deduction
If a household has a monthly net self-employment income gain after the 50% cost-to-produce deduction or a farm loss offset, if the household is entitled to a 20% earned income deduction from the net self-employment amount. If there is a net self-employment income loss, the household is not entitled to an earned income deduction from self-employment income.
If a household has earned income that is not from self-employment, the earned income deduction from that income is computed based on the amount before the 50% cost to produce deduction or farm loss offset, is made.
104.891 Verification
The farmer's or business owner’s most recent income tax forms and schedules are normally good sources of verification for self-employment income and expenses. However, other sources may be used. If the tax form is questionable or not
104.891 Verification (continued)
available, the case manager must ask to see other documents that support the income and expenses that the household has reported.
Other sources of verification may include, but are not limited to, ledgers, charge account statements, sales slips, canceled checks, invoices, purchase orders, and
cash receipts. In documenting this verification, the case manager should record the date, identify the other party or company, describe the expense or income, and record the amount, taxes, and discounts, if any.
In some instances, such as anticipated changes or a new business, it may be necessary to obtain information from collateral contacts.
If a bankruptcy action has been initiated, the case manager may get a statement from the bankruptcy trustee regarding the debt reorganization plan concerning the accessibility of assets and the anticipated gross income and expenses.
104.892 Making Changes
When income has been annualized and changes are reported during the 12-month period, the State agency must make adjustments. The following are some examples.
This household filed its income tax return in February and applied for SNAP benefits in February. It is subject to simplified reporting. The household did not choose to have the income prorated in uneven amounts.
Original Certification:
$16,000 crop income
- 8,000 50% self-employment deduction (actual farm expenses were $4000)
$ 8,000 divided by 12 months = $667 net per month for February through January of the following year.
Due to a drought, the household reported on July 20 that it expected to only get $10,000 from the sale of crops for the year. The case manager must re-annualize the income over the same 12-month period that was used at the time of certification or recertification using the new income amount.
1st Change:
$10,000 crop income
- 5,000 farm expenses (50% self-employment deduction)
$ 5,000 divided by 12 months = $417 net per month for August through January of the following year.
104.892 Making Changes (continued)
The household came in on August 1 and reported a second change. It reported that it expected to receive an additional $2,400 payment in September from the sale of crops on land that it recently purchased. The case manager must re-annualize again over the same 12-month period that was used at the time of certification or recertification based on the most recent information available.
2nd Change:
$10,000 crop income
+ 2,400 additional crop income
12,400 total gross income
- 6,200 expenses
$ 6,200 divided by 12 months = $517 net per month for September through January in lieu of all previously computed amounts. A Notice of Adverse Action must be sent in August.
The end result is that this household will be certified with net monthly farm income of $667 for February - July, $417 for August, and $517 for September - January.
If her income and expenses were annualized and a person leaves the hairdressing salon where she rents a chair during the 12-month period, the case manager should stop counting the self-employment income when the last income is received from that source. For example, the hairdresser reported the first of September that she planned to leave the salon in October and take a job the first of November as an employee in another salon. Her hairdressing self-employment income had already been included in the average amount. The averaged amount of income would continue to be counted for October. No self-employment income would be counted for November, but her earned income from the new salon would be counted.
If a household is expected to receive residual income after the person stops being actively engaged in a business enterprise and the amount of income is expected to be substantially more or less than that previously averaged, the case manager must calculate the residual income based on the anticipated monthly amounts. For example, the annualized self-employment income resulted in an average monthly amount of $400. On June 5, the person reported that he would not be actively engaged in farming after June and would not receive any additional income from that source except that a person who bought some hay owes him $100 in July and $200 in August. The person does not anticipate any future expenses. In this case, the case manager would stop counting the $400 monthly amount after June’s issuance and calculate future self- employment income based on the amount anticipated to be received each month. The case manager could count $100 as self-employment income for July and $200 self-employment income for August, or the anticipated fluctuating income could be averaged over the remainder of the certification period.
104.9 IRS Forms
104.91 1099 MISC
104.92 Schedule C