FAA4.J Self-Employment Income (SEEI SEEW) : 09 Self-Employment Verification
Self-Employment Verification
(01/01/23 - 12/31/23)
The participant must provide verification of self-employment income and expenses.
To be eligible for the 40% NA/CA self-employment expense deduction, only one allowable expense must be verified.
NOTE Self-employment income due to farming uses actual expenses and has special budgeting procedures. (See Farming for more information on Farming expenses and budgeting.). To budget self-employment business that has been in operation for less than one year, see Business Less Than One Year.
Follow the verification process when verifying income and expenses. Verification includes and is not limited to all of 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 (IRS) U.S. Individual Income 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 annualized gross income. Use the amount listed on line 1 to budget self-employment income. Do not use the amount on line 7, “Gross income.” Line 7 includes deductions that are considered in the 40% self-employment expense deduction.
Schedule E, Supplemental Income and Loss
Schedule F, Profit or Loss from Farming
Schedules B-1, C, D, K, K-1, K-2, K-3, and M-3 of IRS U.S. Return of Partnership Income (1065) form (See Limited Liability Company (LLC) Definition)
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 canceled checks and payroll checks
Participant’s statement for self-employment income, when one of the following apply:
Other attempts to obtain verification have failed.
Obtaining documented or collateral contact verification may cause harm or undue hardship(g) for the participant.
NOTE Participant statement verification may be used to verify self-employment expenses. Verify self-employment expenses when questionable.
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.