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COMBINED MEDICAID 503-1 Self-Employment Income Supersedes: FMA 503-1, (07/01/08 &10/01/08); MA 503-1 (07/01/16) Reference: 42 CFR 435.601; 20 CFR 416.1110(b), 416.1111(b), and 404.1065 through .1096; ARM 37.82.101 Overview: Count net self-employment income when determining Medicaid eligibility. To be considered self-employed, an individual must meet the following criteria: 1. Income is earned directly from their business/trade; they do not receive wages or salary from an employer. 2. They are responsible for full payment of their Social Security and Federal withholding taxes; 3. The individual is not employed by another person and an employer does not control or direct the services the self-employed individual performs. 4. If they file taxes, they use self-employment tax forms (schedule C, C-EZ, F, SE, Form 1065, etc.); and 5. They “materially participate” in the income production. NOTE: Other indications of self-employment are used when a client states they are self-employed, but they haven’t yet filed income taxes. These include a business license, evidence of ongoing, regular business activities, financial accounts in the business name, periodic advertising, and business registration with the Secretary of State. SELF-EMPLOYMENT STRUCTURES: Clients may refer to being self-employed under a variety of business structures; however, not all business structures are considered self-employment for Medicaid purposes. The most common business structures include: 1. Sole Proprietorship: Unincorporated business structure owned by one or two individuals. The owners are responsible for business income and liabilities. NOTE: Limited Liability Companies (LLCs) are NOT sole proprietorships. 2. Independent Contractor: Individual who pays their own employment taxes and does not have an employee/employer relationship. Considered self-employed unless incorporated or an LLC. Should be registered with Department of Labor and Industry. 3. Sharecropper: When the individual pays the cost of doing business and receives a portion of net income in exchange for their labor they are considered self-employed. However, if they are not responsible for the costs of doing business, incorporated or an LLC, they are not considered self- employed. CORPORATIONS: