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Aged, Blind and Disabled Manual Section: Financial Eligibility Requirements

Policy Manual Number: 110.025 Chapter: ABD Earned Income

November 01, 2021 Division of TennCare 6 If an applicant is self-employed and has a partner or is a joint owner of a business, the applicant’s self-employment net earnings will be based on his distributive share from the business.

Federal Income Tax Return Forms

1. Net Earnings from Self-Employment (NESE)

Self-employed individuals report their Net Earnings from Self- Employment (NESE) on the Schedule SE tax form. Other forms may be used to report income (Schedule C, Schedule F, etc.) but the amount listed on the Schedule SE should be used to verify self- employment earnings, whenever possible. The NESE is the gross income from any trade or business less allowable deduction for that trade or business. NESE also includes any profit or loss in partnership. For the purpose of determining eligibility, count the NESE on a taxable year basis and divide the total of these earnings equally among the months in the taxable year.

Verify net earnings from self-employment on Schedule SE. The amount of net earnings from self-employment that should be reported based on a Schedule SE may be found under:

• Section A, line 4; or • Section B, line 4.c.

If line 4 or 4.c. show a positive amount of less than $400, then line 3 is used even if the amount on line 3 is greater than $400.

2. Schedule SE may not be available or usable when:

• An individual has started a new business and was not self- employed in the prior tax year; or • An individual has applied for or is receiving Title II (Social Security) benefits.

3. Other Tax Forms and Business Records

If an individual does not have a Schedule SE, then other tax forms may be used to determine and verify net self-employment earnings. Other forms include:

• Schedule F: Used to report income and expenses from a farm operation. Net profit or loss is listed on the Schedule F. • Schedule C: Used to report profit or loss from a Sole Proprietor business (general). Net profit or loss is listed on the Schedule C. • Business Records: When a federal income tax return is not available, or the individual has changed, stopped or added to the business, business records may be used to determine net earnings. When business records are used, use the individual’s