09 Self Employment Verification
The participant must provide verification of self employment income and expenses.
To be eligible for the 40% CA NA
self employment expense deduction only one expense must be verified.
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Self Employment income due to farming uses actual expenses and has special budgeting procedures. (See Farming) |
Follow the
verification process when verifying income and expenses. This verification may include, but is not limited to, the following:
●Bookkeeping records
●Business ledgers listing income amounts received and expenses incurred
●Actual receipts
●Contracts for work
●Statements from patrons and companies
●Most recent Internal Revenue Service U.S. Individual Tax Return (1040) form. Below are common IRS Schedule forms that the participant may provide in addition to the 1040:
NOTE The gross income from the Schedule C, Part I Income section, line 1, gross receipts or sales, is the gross income annualized or averaged to determine a monthly amount of income.
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When self employment expenses exist, the 40% self employment expense deduction must be subtracted from line 1, gross receipts or sales. Clearly document the case file(g) with how the final amount of net self employment income was determined. |
Schedule E, Supplemental Income and Loss
Schedule F, Profit or Loss from Farming
Schedule K-1, Partner’s Share of Current Year Income, Deductions, Credits, and Other Items income tax returns
NOTE The most recent IRS 1040 and Schedule forms are acceptable as verification of self employment income and expenses when the participant indicates it accurately reflects the participant's current income.
●Rent or mortgage receipt for business property
●Property tax statements for business property
●Utility costs
●Cleaning cost bills
●Business location and equipment maintenance
●Personal records indicating personnel salaries or costs of outside labor, such as cancelled checks and payroll checks
NOTE For CA and NA, a
participant statement may be used to verify self employment expenses.
Have the participant sign the Authority to Release (FA‑059) form to contact any companies or businesses involved.
When
self employment expenses are not verified using the verification process, determine eligibility without those deductions.