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)
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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.
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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.