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West Virginia Income Maintenance Manual Chapter 4

West Virginia Income Maintenance Manual Page 164 Chapter 4 Income

4.7.5.A.2 Determining Gross Profit Gross profit from self-employment is the income remaining after deducting any identifiable costs of doing business from the gross income. The instructions below must be used to arrive at the gross profit, which is used to calculate countable income. These instructions are based upon the IRS Forms used by self-employed individuals to file federal taxes on their self- employment income. Income from self-employment is calculated by totaling the following items, as described on the IRS Forms: • Add payment cards and third-party network transactions. • Add gross receipts or sales (separate from items reported above). • Add income that results from “Statutory Employee” status. If an individual’s income results from such a status, they would receive a W-2 for the year that has the “Statutory Employee” box checked. • Add any other form of income received by the business. • Subtract returns, allowances, and other adjustments. • Subtract the cost of goods sold, calculated using the following methodology: o Add value of inventory at the beginning of the period under consideration. o Add purchases (disregarding cost of items withdrawn for personal use). o Add labor costs (disregarding amounts paid to oneself). o Add materials and supplies. o Add other costs. o Subtract value of inventory at the end of the period under consideration. • Subtract the expenses related to the business’ operations. The following expenses can be deducted: o Advertising o Car and truck expenses o Commissions and fees o Contract labor o Depletion o Depreciation and section 179 expense deduction o Employee benefit programs