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COMBINED MANUAL

ISSUE DATE 08/2019

VERIFYING SELF-EMPLOYMENT INCOME

0010.18.09

Verify self-employment income as a condition of eligibility. The agency must determine self-employment using the method the client chooses for each self-employment business. If business taxes for the most current tax year were filed within the last 12 months, the client can choose either the taxable method or the 50% method. If a client has not filed business taxes within the past 12 months, the client must use the 50% method.

● 50% Income Method. The client may use business records or the Self-Employment Report Form (DHS-3336) (PDF) as monthly proof of self-employment income and expenses.

Examples of business records include:

-Copies of daily, weekly, or monthly ledgers. -Invoices. -Itemized receipts. -Purchase orders. -Copies of customer receipts. -Transportation logs. -Cancelled checks. -Copy of business checking account statement. -County agency forms. -Records from the Small Business Administration (SBA). -Records from the Farmers Home Administration (FHA). -Records from the Production Credit Association (PCA). -Statements from the client's customers.

● Taxable Income Method. Complete business tax returns and relevant schedules must be used to verify business income under this method. The form of business determines which income tax return must be filed with the IRS. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. See the IRS website for more information on which schedules are needed for each business see https://www.irs.gov/businesses/small-businesses-self- employed/business-structures and for more information on tax forms see https://www.irs.gov/forms-instructions.

MFIP, DWP MSA, GA, GRH: Follow general provisions.

SNAP: Require complete personal and business tax returns including all business forms. Required forms include but are not limited to:

● Form 1040 U.S. Individual Income Tax Return.

● Business Schedules (1040) forms:

- Schedule C Form 1040, Profit or Loss From Business. This schedule is used to report income or loss from a business operated or a profession practiced as a sole proprietor.

- Schedule C EZ (Form 1040), Net Profit From Business. This schedule is used as a simplified version of Schedule C if operated a business or practiced a profession as a sole proprietorship or qualified joint venture, the client was a statutory employee and has met all the requirements listed in Schedule C-EZ, Part I.

- Schedule D (Form 1040), Capital Gains and Losses. This form is used to report sales, exchanges or certain involuntary conversions of capital assets, certain capital gain distributions, and nonbusiness bad debts. The form includes the tax computation using maximum capital gain rates.

- Schedule E (Form 1040), Supplemental Income and Loss. This form is used to report income or loss from rental real estate, royalties.