Page 159

Child Care Assistance Program Policy Manual Issued 10/2022 Annualizing self-employment income 6.15.6 For information about what to consider self-employment income and different self-employment ownership types, see Chapter 6.6.5 (Self-employment income). Annualize self-employment income before determining if the self-employment meets the minimum work requirement and authorizing care for self-employment. See Chapter 4.6.6.6 (Employment outside of an Employment Plan) and Chapter 9.1.1.1 (Authorizing care – Self-employment). There is an additional policy that applies to rental property income. See Chapter 6.15.9 (Annualizing rental property income). Method of calculation There are two methods of calculating self-employment income: the taxable income method and the 50% of gross income method. Typically, families choose the method of calculation used to determine their self- employment income. Exceptions: • Families only have a choice of the taxable income method if they have filed taxes with the Internal Revenue Service (IRS) for the most recent year and provide the tax return and related schedules as verification. See Chapter 7.9 (Income verification). • If the income and expenses on the tax forms from the most recent year are not the most accurate assessment of annual ongoing income available to the family from the self-employment business, the family must choose the 50% of gross income method. Families choose a method for each self-employment business. For families also receiving MFIP, DWP or SNAP, different methods may be chosen for different programs. Because different methods and verification may be used for different programs, there may be differences in the amount of self-employment income calculated for each program. If there are concerns about inconsistent information, the agency may request the family provide additional verification to explain discrepancies. See Chapters 7.3 (Verification – Initial application), 7.4.3 (Inconsistent information), 7.6 (Verification – Eligibility redetermination) and 13.3 (Fraud Referrals). Verification requirements are dependent on the method chosen. See Chapter 7.9 (Income verification). Once self-employment income has been calculated, the amount counted continues at the same level until redetermination or until the family reports that the income does not provide the most accurate assessment of annual ongoing income available to the family and provides verification to update the calculation. This may include updating the calculation using the same method or changing income calculation methods (see “Changing self-employment income calculation methods” below). Taxable income method To calculate self-employment income using the taxable income method, use information from the Internal Revenue Service (IRS) tax return, including schedules, that has been filed with the IRS for the most recent year.