FAA4.J Self-Employment Income (SEEI SEEW) : 06 Budgeting Self-Employment Income : B Annualizing Self-Employment
Annualizing Self-Employment
 
(01/01/19 – 12/31/19)
When the self-employment business has been in existence for 12 or more months and there are no significant changes, divide the annual income by 12 to calculate a monthly amount.
 
EXCEPTION
When less than 12 full months of income have been received, follow Business Less Than One Year budgeting.
Self-employment income due to farming has special budgeting procedures. (See Farming)
 
Request, verify, and review the participant’s income received during a 12-month period to determine the income that is reasonably certain to be received during the approval period. (See Self-Employment Verification)
 
Use the most recent Internal Revenue Service (IRS) tax return to determine the annual income. When a tax return is not available, use the 12 full months of income that applies as follows:
 
●For new applications, use the 12 full months prior to the month of application.
●For renewal applications, use the 12 full months prior to the month of the timely renewal interview.
●For reported changes, use the 12 full months prior to the month the change was reported.
 
EXCEPTION
When the reported change is a change in income, project or anticipate the self-employment income.
 
Discuss with the participant whether the annualized amount reflects the monthly income reasonably certain to be received during the approval period. Complete one of the following based on the discussion:
 
●When the annualized amount accurately reflects the participant's expected income, budget the annualized amount. (See Example Annualizing Self-Employment)
●When the annualized amount does not accurately reflect the participant's expected income, see Projecting Self-Employment.
●When the annualized amount is calculated using the most recent Internal Revenue Service (IRS) tax return and does not accurately reflect the participant's expected income, see Anticipating Self-Employment.
 
WARNING
Documentation must support determinations of eligibility and benefit level. Document in enough detail to ensure that any reviewer can assess whether the determination is reasonable and accurate. Include specific information regarding the reason the income is determined to be normal. (See Income Documentation Requirements)
 
When expenses are incurred, see Allowable Business Expenses.