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)
Procedures
When the participant is present, have them sign the Authority to Release (FAA‑1765A) form to contact any companies or businesses involved. The FAA-1765A can be faxed or emailed to the participant's employer when it is not possible to use the Application for Benefits (FAA-0001A) or the HEAplus Authority to Release signed statement.
Determining the correct income budget includes using all of the following:
●Information provided, which includes and is not limited to, from any of the following:
Information on the signed application
System interfaces
NOTE System interfaces, when the participant agrees, must be used as the primary source of verification unless questionable(g).
Documented verification provided
●Discussion with the participant during the interview and after, when needed.
●Entering the income information provided into AZTECS and HEAplus.
●Documentation.
NOTE Documentation must support determinations of eligibility and benefit level. Document in sufficient detail to ensure that any reviewer can assess whether the determination is reasonable and accurate. Include specific information regarding the reason the income is determined to be normal. (See Budgeting Income Documentation Requirements for additional information.)
Check System Interfaces
When determining the income budget, complete all of the following:
●Review system interface screens in HEAplus and AZTECS. Compare the system interface screens with what is listed on the application and provided documents from the prior and current applications. Review the work hours and wages with the participant to ensure there are no discrepancies with what the participant provided.
NOTE When the participant agrees, the system interface must be used as the primary source of verification unless questionable(g).
●Review HOSC in AZTECS. Discuss with the participant the income displayed in the two quarters before the date HOSC is accessed for terminated income. When verification of terminated income is not in the case file(g), participant statement verification is allowable after all of the following:
Collateral contact verification is not available
Documented verification is not provided
The participant requests assistance
What Budgeting Method to Use
As mentioned above, the budgeting method depends on each situation.
Unless the income type is one of the following found in Averaging Income, see Projecting Income to start:
●Contract income (See Budgeting Contract Income for procedures.)
●Child support, cash medical support, or alimony (See Budgeting Child, Medical, and Spousal Support for procedures.)
●Educational income (See Budgeting Educational Income for procedures.)
●Foster Care payments, adoption subsidies, or guardian subsidies (See Budgeting Foster Care and Adoption or Guardian Subsidies for procedures.)
●Self-employment income (See Budgeting Self-Employment Income for procedures)
When the participant is paid monthly, and the same amount is expected to continue, project the actual monthly amount for ongoing. (See Budgeting Income Received Once a Month for additional procedures.)
When the gross income amount includes any of the following types of countable income expected to continue, a separate income budget may be required:
●Cash bonuses and incentives (See the Bonuses and Cash Incentives income type for keying instructions.)
●Flex credits (See the Flex Credits income type for keying instructions.)
●Leave pay (See the Leave and Severance Pay income type for keying instructions.)
●Reimbursements (See the Reimbursements income type for keying instructions.)
●Tips and gratuities (See the Tips and Gratuities income type for keying instructions.)
When a participant receives one of the above income types, that is not subject to hours or rate of pay, determine the number of hours to key in the AZTECS income screens using one of the following:
●One hour for income received weekly, bi-weekly, semi-monthly, or monthly
●Three hours for income received quarterly
●Six hours for income received semi-annually
●Twelve hours for income received annually
NOTE When the income is not expected to continue, remove the income for ongoing months.
When the recently received earnings are not going to continue, the budget must be anticipated by creating the budget based on hours and rate of pay. (See Anticipating Income for procedures.) Anticipating income budgeting methods are frequently used when one of the following occurs:
●There is a new source of income (See Anticipating a New Source of Income for procedures)
●A change occurred in the hourly rate of pay, in the normal hours, or both (See Anticipating Hourly and Pay Rate Changes for procedures.)
●One or more semi-monthly checks are not normal (See Anticipating Semi-Monthly Income for procedures.)
Budget actual income by using the AC Frequency Code when a participant does not receive a full month of income due to one of the following:
●There is a new source of income (See Anticipating a New Source of Income for procedures.)
●A source of income is ending (See Budgeting Terminated Income for procedures.)
NOTE It is important to delete income in ongoing months when the income is no longer continuing.
See Actual Income when a participant receives income from any of the following:
NOTE Odd jobs and day labor are normally received without a set frequency (e.g., weekly, bi-weekly, etc.). When a set frequency is identified, convert the income using the appropriate Frequency Code.
Budgeting Income Documentation Requirements
Documentation must explain discrepancies and support the decision made. Include all of the following explanations when documenting income and budgeting:
●The income period used and the reason why.
●How the income was determined.
●Deductions such as earned Income tax credits (EITC), child support, etc.
●The reason why the income on the application is higher or lower than the amount budgeted, when applicable.
●When applicable, the reason why the pay stubs in the case file(g) were not used.
●The reason why less than the gross income was budgeted, when applicable.
When system interface or documented verification is unavailable, and a collateral contact is used to verify a participant’s income, document all of the following information provided by a collateral contact:
●Date of collateral contact
●Name, title, and phone number of the person providing verification
●Hourly wage
●Hours worked
●Pay period end date
●Actual pay date
●Frequency of pay
●Date changes occurred or are expected to occur
●Extra income, such as bonuses, tips, commissions, and overtime
●Date income started
●Date income stopped
Request the income the participant received in a 30-day income period. When using paycheck stubs to budget income, review and discuss the information on the paycheck stubs with the participant to budget the income accurately, including and not limited to all of the following information:
●Confirm the participant’s name on the paycheck stub.
●Verify how often the participant is paid based on pay periods and pay dates.
●Establish the amount normally expected based on salary, wages, and hours.
Determine whether the participant receives additional pay, such as any of the following:
●Advances
●Bonuses and incentives
●Cafeteria plans
●Commissions
●Flex credits
●Leave pay
●Reimbursements
●Tips and gratuities
When the income is from a new source of income or a terminated source of income, verify all the following additional information:
●For a new source of income beginning anytime in the application month, verify all of the following:
Hire date
The first date worked
The first pay date, a full or partial check
Expect work hours
Pay frequency
●When a terminated source of income is reported or when HOSC displays income in the two calendar quarters(g) before the date HOSC is accessed, complete all of the following:
Review the case file to determine whether the terminated source of income has been verified.
When verification of the terminated source is not in the case file, verify all of the following:
●Date of termination.
●Reason the income terminated when reviewing for voluntary quit. (See Reasons for Work Requirement Disqualifications for information on voluntary quit and striker policy.)
●The gross amount and date of last income received when the income is received in the month being budgeted.
●The gross amount and dates of leave pay received after the participant terminated employment when the income is received in the month being budgeted.
NOTE Verification of the last gross amount is required only when the income is counted in the budget month being determined.
●When the verified income is received before the budget month, ensure not to budget income from that terminated income source for the budget month being determined.
●When the verified income is received in the budget month being determined and is not expected to be received in any of the following months, ensure not to budget that income for ongoing months.
When a participant provides two nonconsecutive paycheck stubs and the middle paycheck stub is missing, calculate the gross pay of a missing paycheck stub using Year-to-Date (YTD) gross wages by completing all the following:
Subtract the current gross wages shown on the paycheck stub received after the missing paycheck stub from the YTD total.
Subtract 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.
NOTE See the Earned Income Worksheet (FAA-1269A) form for a grid to aid with the calculation of gross pay of a missing paycheck by using the Year-To-Date.
Verification
System interface and the case file(g) must be reviewed before verification is requested. No additional verification is needed when AZTECS interface or HEAplus hubs have verified the information.
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 when one of the following occur:
Obtaining documented or collateral contact verification may cause harm or undue hardship(g) for the participant.
When all of the following occur:
●Other attempts to obtain the verification have failed. This includes documented and collateral contact verification.
●The participant has requested assistance from FAA.
●The worker has evaluated the request for assistance and cannot obtain the verification from another acceptable source.
●The participant statement is not questionable(g).
See the income type for examples of what can be used for verification.
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Legal Authorities
7 CFR 273.10(c)
7 U.S.C. 2014 (f)(1)(A)
last revised 05/28/2024