FAA4.J Self-Employment Income (SEEI SEEW) : 09 Self-Employment Verification
Self-Employment Verification
(01/01/17 - 12/31/17)
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.
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.
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 Participant statement verification may be used to verify self-employment expenses.
Have the participant sign the Authority to Release (FAA‑1765A) form to contact any companies or businesses involved.
When self-employment expenses are not verified using the verification process, determine eligibility without those deductions.