Self-Employment Definition
Self-employment is defined as working for oneself rather than working for an employer.
NOTE Corporations or
Limited Liability Companies(g) that file taxes as corporations are not considered self-employment. (See
Dividends and Royalties)
Individuals who are self-employed generally file federal income tax returns that identify their self-employment status. However, when tax returns are not filed, it may be necessary to inquire further into the situation to determine when a participant is self-employed.
When determining whether income meets the self-employment definition all factors relating to the income source must be explored with the participant. The factors to consider, include but are not limited to the following:
●Participant’s intention is to make a profit or produce income as a regular occupation.
●Participant uses the income for their livelihood.
●Participant represents to others as being engaged in a business of selling of goods or providing a service.
●Participant is available to take on additional clients.
●Participant has documentation that supports their claim of self-employment.
●Participant is a member of a business or trade association.
●Participant does not have an employer - employee relationship. (See
Wages and Salaries for additional information on an employer - employee relationship)
A single factor is not always sufficient to determine whether a person is self-employed. FAA staff must explore all factors, to determine whether an income producing activity is self-employment.
Self-employment may include, but is not limited to the following situations:
●Income received directly from one's own business, a sole proprietorship, as an independent contractor, or as a member of a partnership.
●Income received from odd jobs or from irregular and varied activities.
●Income received from providing services.
●Income received from selling or reselling goods, including personal property and items purchased for the purpose of resale.
●Income received from working for others on a commission or piecework basis.
Self-employed participants may or may not incur
allowable self-employment expenses.
NOTE The
case file(g) must be documented with the reason the income was determined as self-employment income or earned income.
(See
Self-Employment Types for additional policy and procedures)
For examples, see the following:
When a participant does not meet the definition of self-employment, see
Earned Income Types.