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Families and Children Manual Section: Financial Eligibility Policy Manual Number: 010.045 Chapter: Medically Needy Countable and Excluded Income

November 01, 2021 Division of TennCare 3

Self-Employment Count the annual net earnings from self-employment, and divide by the months in the taxable year. Self-employment is the act of engaging in a trade or business; which is an activity carried on for a livelihood or in good faith to make a profit. Individuals may be contractors, franchise holders, owners, operators, partners, etc. An individual must meet all of the following criteria to be considered self-employed:

• Earns income directly from the business or trade, not from wages or salary from an employer; • Is responsible for the payment of their entire Social Security and federal withholding taxes; • Does not have an employee/employer relationship with another individual and the services performed cannot be controlled by an employer; and • Should file self-employment tax forms (Schedule F, C, C-EZ, SE, etc.).

Net income is the gross income from any trade or business less allowable deductions for that trade or business. Allowable deductions include expenses paid to operate the business or participate in the trade, including:

• Car and truck expenses; • Depreciation; • Employee wages and fringe benefits; • Property, liability or business interruption insurance; • Interest on loans for your business; • Legal and professional services; • Rent or lease of business property and utilities; • Commissions, taxes, licenses and fees; • Advertising; • Contract labor; and • Repairs and maintenance.

There are different types of business structures referred to as self- employment. Some of the common structures include:

• Sole Proprietorship: A self-employment business that is not incorporated and has one or two owners. A Limited Liability Company (LLC) is not a sole proprietorship. • Independent Contractor: An individual who pays his own employment taxes and does not have an employee/employer