Page 23

Subsidized Child Care Assistance Program Policy Manual Chapter 7. Family Definition and Determining Income Eligibility Revised 08/01/2024

23

line 1 4 Cost of goods sold (from line 42) $85,310 5 Gross profit. Subtract line 4 from line 3. $256,530 6 Other income

7 Gross income $256,530

In this example, since there are “cost of goods sold” on line 4, the “gross income” on line 7 is less than “gross receipts” or sales on line 1. Line 1 should be used as the gross income amount for SCCA. The amount on line 4 for cost of goods sold should be added to the expenses from Part II of Schedule C. The child care worker must use the expenses from the deductions section on Part II of the Form 1040 Schedule C document.

In this example, the total expenses on line 28 of Part II of the Form 1040 Schedule C are $212,235 (not pictured in the chart above). The child care worker will need to add “cost of goods sold” from line 4 of Part I ($85,310) to the total expenses from Part II ($212,235). $85,310 + $212,235 = $297,545 total allowable expenses.

$341,840 gross receipts minus $297,545 total allowable expenses = $44,295 countable self-employment income.

If a Schedule C form is submitted for verification of self-employment, the child care worker should carefully review Part I - Income to determine the gross income to be counted. On the Schedule C form, if there is income listed on line 6 of Part I for "Other Income", this will result in line 7, "Gross Income", being higher than line 1, "Gross Receipts or Sales". In this case the "Gross Income" from line 7 should be considered the gross income for SCCA purposes. If there is an amount listed on line 4 for "Cost