Page 16

UPDATED: JANUARY 2012

114

INCOME EARNED

SELF-EMPLOYMENT OR SMALL BUSINESS INCOME

Following are some of the items of business expenditures, which are not deductible from gross business income:

• Payments on the principal for real property used wholly or partially in the business;

• Any expenses which are not directly related to the operation of the business, (for example, personal expenses such as lunch or transportation for work).

Income and expenses are generally considered on an annual basis. The difference between income and expenses is then divided by 12 to establish the A/R’s monthly earned income. The primary source for verifying the A/R's income and expenses is his/her income tax records.

How to Estimate Net Earnings from Self-Employment:

If the A/R has been conducting the same trade or business/farm for several years; has had net earnings which have been fairly constant from year to year; and anticipates no change or gives no satisfactory explanation why net earnings would be substantially lower than in the past, take the net profit from the past year as an estimate for the current year. Divide yearly net profit by 12 to determine monthly income.

If an A/R is engaged in a new trade or business/farm, give the A/R the Financial Status (Farm or Business) Form (DOH-4469) to complete. Divide net profit by 3 to project monthly income for the next year.

NOTE: When using the three-month business record, a loss in one month may be used to offset a profit in another month. If an A/R owns more than one business, and tax returns are not available, a DOH- 4469 must be completed for each business. A loss in one business does not offset a gain in another.

(MRG)