Income Budgeting Basics
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This subject includes the starting point to determine an income budget with rules used during the budgeting process.
Policy
FAA uses the income a budgetary unit(g) receives or expects to receive to create an income budget. FAA uses the income budget to determine eligibility and benefit amounts for NA and CA. (See Determining Benefits for additional information about determining eligibility and benefit amounts.)
FAA creates a budget to project or anticipate income based on all of the following:
●The source of the income
●The current income status
●Any changes expected to the income
FAA budgets income based on past income information and the participant’s current circumstances by completing all of the following:
●Requesting verification and reviewing the income received in an appropriate period based on one of the income types:
For wages and salary, 30 calendar days or longer.
For self-employment,12 months, the number of months the participant has been in business, or current Income Tax Return.
For contract income, the current contract.
●Discussing with the participant what income the participant reasonably expects to receive.
●Budgeting income received in a budget month(g), FAA uses the income to determine the benefits for that month.
●Projecting or anticipating income based on recently received income, including one of the following:
Projecting income for the approval period when the income is reasonably certain to continue.
Anticipating income for ongoing months when income is expected to change, begin, or terminate.
FAA considers all of the following when budgeting income:
●All income available to the budgetary unit to determine eligibility and benefit level.
NOTE FAA does not budget the income of a nonparticipant(g) to determine eligibility and benefit level. (See the CA Need Family Test for more information about when the income of the family(g) is used to determine eligibility.)
●The income of a disqualified participant. (See Disqualified NA Participants Effect on the NA Benefit Amount and Whose Income Effects the CA Benefit Amount for more information about how a disqualified participant’s income counts toward eligibility and benefit level.)
The gross income (amount before deductions) is used for the income budget. That includes and is not limited to when the income is reduced for fraud or an intentional program violation.
NOTE The gross income for Social Security Administration (SSA) benefits is rounded down to the nearest dollar.
When the gross income amount includes non-countable income, only the countable amount is used for the budget.
NOTE For NA, when income is reduced to collect an overpayment from the same income source(g), the income budget is the gross income minus the overpayment amount.
When the gross income amount includes any of the following types of countable income, a separate income budget may be required:
●Bonuses and incentives
●Flex credits
●Leave pay
●Reimbursements
●Tips and gratuities
See Income Types for additional information about income types that have different budgeting methods.
When an employee purchases stock from their employer, the employer may match some or all of the stock purchase. Any purchase for the employee by the employer is not countable as income. The income budget is the gross income minus the amount the employer paid.
When the income of one or more participants and a nonparticipant are combined into one payment, FAA requests verification to identify each participant’s share of income.
NOTE When it is unclear how much is allocated for each person, the amount is divided equally by the number of persons receiving the income.
The replacement of lost or stolen income is not counted in the income budget.
Ongoing income paid consistently weekly, bi-weekly, or semi-monthly uses one of the following conversion factors when determining the budgeted monthly amount:
●Weekly income is converted by multiplying the average weekly income in the budget month by 4.3 to take into consideration months with five pay periods.
●Bi-weekly income (paid every two weeks) is converted by multiplying the average bi-weekly income in the budget month by 2.15 to take into consideration months with three pay periods.
●Semi-monthly income (paid twice a month) is converted by multiplying the average semi-monthly income in the budget month by 2.
Income is budgeted in the month the participant receives the payment. Income is considered received at the time it is made available to the participant. FAA budgets income for the month the payment was intended for reasons including, and not limited to, any of the following reasons:
●Income is paid directly to a financial institution and automatically deposited into the participant's account.
●Income is held or delayed at the participant's request, or the participant fails to obtain the payment when it becomes available.
●An extra check is received due to a change in pay dates, such as a third or fifth check issued early due to a holiday or weekend.
●A change in pay dates or mailing cycles results in monthly or semi-monthly pay being received in another month.
When the income is from a new source or a terminated source, FAA verifies all the following additional information:
●For a new source of income that begins within the application month, all of the following information:
Hire date
The first date worked
The first pay date
Hourly rate
Hour worked per week
●For a terminated source of income that ends in the two quarters before the date of the interview, all of the following information:
The date of termination.
The last date worked.
Last date paid
The gross amount and date of last income received when the income is received in the budget month.
The gross amount and dates of leave pay received after the participant terminated employment.
When a participant provides two nonconsecutive paycheck stubs and the middle paycheck stub is missing, FAA calculates the gross pay of a missing paycheck stub by using year-to-date income by completing all the following:
●Subtracts the current gross wages shown on the paycheck received after the missing paycheck stub from the YTD total.
●Subtracts the YTD total shown on the paycheck received before the missing paycheck stub from the remaining amount.
●The resulting amount is the gross wages received on the missing paycheck.
When determining how a participant’s income is budgeted, FAA takes into consideration the source of the income and the current status of the income to budget the income based on one of the following:
●When the verified income information received in a 30-day period is reasonably expected to continue, the income is budgeted for the approval period. Including any of the following:
Jobs that pay salary or wages and pay employees with one of the following pay frequencies:
●Weekly
●Bi-weekly
●Semi-monthly
●Month
Jobs that may include any of the following income types:
●Bonuses
●Incentives
●Tips
(See Projecting Income for more information.)
●When verified income information in a 30-day income period does not continue because of a change, the verified changes are used to anticipate income to budget. Such situations include, and are not limited to, all of the following:
A new source of income
Changes in pay rate and hours worked
SM unusual high and low
(See Anticipating Income for more information.)
●Work without a specific pay frequency. The actual sum of the income in a 30-day period is budgeted. This includes, and is not limited to, any of the following types of work:
Odd jobs
Day wages or daily labor
Terminated income
Guardian and adoption subsidy payments
(See Actual Income for more information.)
●FAA averages income received over an extended period to distribute the payments over the time the income is intended to be covered. This includes, and is not limited to, any of the following:
Alimony
Contract income
Self-employment(g) income
Child support and child medical support payments
(See Averaging Income for more information)
Verification
The participant has the primary responsibility for providing verification. (See Participant Responsibilities – Providing Verification for additional policy.)
For NA, all of the following income is required to be verified before eligibility is determined:
●Reported on a new application, during the interview of a new application, or changes reported before the eligibility determination of a new application.
●Changes after an eligibility determination of a new application (e.g., a renewal application, mid approval contact, etc.) and any of the following apply:
The source of the income has changed. The income is questionable(g) or unclear(g).
The reported income amount has changed by $51 or more.
The previous verification in the case file is more than 59 calendar days old.
For CA, all income is required to be verified before determining eligibility.
FAA uses system interface to verify income when it is available. When system interface is not available or it is questionable, income is verified by one of the following:
●Documented verification
●Collateral contact
●Participant statement verification can be used when obtaining documented or collateral contact verification may cause harm or undue hardship(g) for the participant or when all of the following occur:
Attempts to obtain the verification from an acceptable source are unsuccessful. This includes documented and collateral contact verification.
The participant’s statement is not questionable(g).
See the income type for examples of what can be used for verification.
Legal Authorities
7 CFR 273.10(c)
7 U.S.C. 2014 (f)(1)(A)
last revised 05/28/2024