1115.040.25 Expenses of Producing Self-employment Income – DSS Manuals

IM-62 May 31, 2017 ; IM-49 July 1, 2009 ; IM-88 October 4, 2006 ; IM-124 September 15, 2003 ; IM-167 September 10, 2001

Allowable expenses for producing income are not limited to the following items.

Costs of livestock (CL), raw materials (SM), seed (SP), fertilizer (FR), supplies (SM), and merchandise (SM). This includes payments on principal and interest (PI) on loans to purchase livestock (CL), raw materials (SM), seed (SP), fertilizer (FR), or supplies (SM) and principal/interest (PI) on loans to produce livestock and crops.

Principal and interest (LI, LP) payments on any income producing property.

Costs of labor (LW), salaries, retirement plans (PE), or wages (LW) paid to anyone other than the self-employed person.

Standards for meals (ML) provided in babysitting or a day care setting is $1.00 per meal per child. If the babysitter or day care center owner can prove that the actual cost of meals is greater than the standard amount, allow the actual cost. Calculate the expense as follows: determine number of children provided meals; determine number of meals per day; calculate number of meals provided weekly; and multiply by the cost per meal (actual or $1).

Cost of meals for potential customers (ML). EXCEPTION: That portion of an expense for meals of an EU member is not allowed. Code that portion as MN.

Costs of repairs and maintenance of machinery, buildings, and equipment (OC).

In some instances, mortgages, liens, or contracts (LI, LP) are held against both the fixed asset and the home. Since payments made on the principal and interest of any mortgage, lien, or contract on the home must be allowed as a shelter expense, determine what part of the payment is made toward the home. Unless the EU can establish the percent of principal and interest attributed to the shelter cost: establish the amounts paid on the mortgage, lien, or contract for both principal and interest; establish the current market value of all the property included in the mortgage, lien, or contract; establish with the EU a mutually agreed upon value for the home, the garden plot unless used to produce income, and the land on which the home rests; determine the portion of the mortgage, lien, or contract payment attributed to the home (this portion is the same percentage as the percentage of the home value to the total value of the property; show this amount as a shelter cost); and determine the portion of principal and interest payment attributed to the fixed asset (this portion is the same percentage as the percentage of the value of the fixed asset to the total value of the property; show this amount as an expense of producing income). EXAMPLE: TOTAL HOME INCOME PRODUCING PROPERTY VALUE $30,000 $15,000 $15,000 % 100% 50% 50% INTEREST $ 200 $ 100 $ 100 PRINCIPAL $ 500 $ 250 $250

Principal (LP) and interest paid on business indebtedness (IN).

Payments made to rent pasture or land for income producing purposes (LR).

Payments made to rent buildings, machinery, or equipment for income producing purposes (RT).

Cost of feed (FD).

Costs of seed or plants (SP).

Costs of fertilizer and lime (FR).

Costs of supplies and materials (SM).

Breeding fees (CL).

Veterinary and medicine costs (CL).

Costs of gasoline, fuel, and oil (CV).

Costs of storage or warehousing (SW).

Self-employment Taxes (ST) Allow all self-employment taxes.

Taxes (TX). -. Allow city, county, and State property taxes assessed on the land, buildings, merchandise, machinery, equipment, and livestock used to produce income.

EXCEPTION : Show taxes assessed on the home of the self-employed EU as shelter expenses.

Since property taxes are shown on the tax bill in two categories, real and personal:

determine the amount of personal taxes paid;

establish with the household a mutually agreed upon value of all personal property being taxed; and

determine the portion of personal taxes that apply to livestock, machinery, equipment, buildings, and merchandise. This portion is the same percentage of the tax as the percentage of the value the business property is to the total value of all personal property. Show this amount as an expense of producing income. EXAMPLE: TOTAL BUSINESS PROPERTY PERSONAL PROPERTY VALUE $8,000 $6,000 $2,000 % 100% 75% 25% PERSONAL PROPERTY TAX $ 400 $ 300 None Shown

Costs of insurance (IC). Insurance premiums on fire, storm, crop, theft, business interruption, or other insurance on other farm business items/assets. EXCEPTION : Cost of insurance on the house must be shown as a shelter cost. The cost of insurance on personal belongings is not a shelter cost or expense of producing income.

Costs of utilities (BU). EXCEPTION : Costs of utilities used in the home for personal comfort must be shown as a shelter expense. A business utility is an allowable cost of producing income if the utility is billed separately from the residential utilities.

Costs of freight or trucking (SF).

Conservation expenses (CE). The difference between the cost of the conservation method and the reimbursement from the conservation agency, if any, is the expense allowed.

Fees for legal or professional services (FL) to maintain the business. EXCEPTION : Legal or professional fees to gain or improve property holdings or to settle inheritances are not deductible.

Licenses for business purposes (FL).

Commissions paid (CO).

Dues for professional organizations (FL).

Bad debts arising from sales or services (BD).

To enter expenses in FAMIS take the following steps after you have entered the income information and comments on the appropriate screens.

From the Income (FMX0) screen press F14=INCEXP;

Enter an “A” on the command line;

Tab to the COM field and enter an “S”;

Prompt or enter the type of expense;

Enter the amount, frequency; begin date, verification, and all applicable fields;

Press enter to commit the expense to FAMIS;

The message “Successfully added” appears.

Press F18=COMMENT to enter a comment about the expense.

Repeat the above steps for each expense type. NOTE : Always review the Food Stamp Budget Summary (FM4A) screen prior to authorizing a case action. From the Budget Summary screen press F14=INCSUM to view the Income Summary Detail (FM33) screen. Select the income to review and press F14=INCEXP to arrive at the Income Expense (FMX1) screen.