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3. The a/b or financially responsible person must be actively involved in the business operation on a day to day basis. The information reported on Internal Revenue Service’s form Schedule E, Supplemental Income and Loss, should be checked to determine whether the individual is actively engaged in the business. If the income is listed as Non-Passive Income (#27k), the individual is actively engaged in the business. If it is listed as Passive Income (#27h), he is not actively engaged in the business.
4. Consider the following when determining the existence of a trade or business:
a. The good faith intention of making a profit or producing income,
b. Continuity of operations, repetition of transactions, or regularity of activities,
c. Regular occupation,
d. Soliciting business by advertisement, etc.
5. A single factor is not sufficient upon which to determine the existence of a trade or business.
Example:
Mrs. Bell reports at a recertification that she began babysitting for her grandchild while her daughter is working. Sometimes she has the child at her home, but as a general rule, she goes to her daughter’s home because the child’s toys and other items are there. She does not baby-sit for anyone else. She receives about $20.00 a week from her daughter. Although some individuals are self-employed as caregivers, Mrs. Bell is not advertising as a provider of daycare services, nor does she intend to produce income. Mrs. Bell is not self-employed. The money she receives for babysitting would be budgeted as wages since an employer/employee relationship exists. (This is the general rule when the child care services are performed in the home of the child’s parent).
6. The following is an overview of the possible types of business arrangements encountered with a/b’s who have income other than regular wages. Some, but not all of these are treated as self-employment income for Medicaid purposes.
Sole Proprietorship