Income Calculations: UpdatedSelf-Employment Tax Forms & FACS Coding

The following are examples / instructions on coding self-employment income in FACS based on documentation in the form of tax forms.

NOTE: These examples are just a sample to help you get started with determining and coding countable self-employment income from tax forms. These are very general. As always make sure the income you are counting on the case matches policy for the program eligibility you are determining; and you are encouraged to contact the SNAP, Child Care Subsidy, TANF, or HRMS units for case specific scenarios.

Example 1: Sole Proprietorship

Brad Shelton provided his last year’s tax Form 1040 and Schedule C as documentation of his self-employment income from his business. He states the amount is representative of what he is currently earning and declares business expenses. He states he has been self-employed for the past 3 years.

  • The gross income will be found on Line 3 of Schedule C.
  • Determine how many months of the year the income on the tax form represents. If it is for the entire year, annualize the amount by dividing by 12 months. If client was involved in self-employment for less than the year; divide by the actual number of months.
  • Take the annual gross income and allow a 50% deduction if the client declares business expenses.

In this example, the gross income is annualized as 22,562 /12 = $1880.17. Business expenses are considered as $1880.17 / 2 = $940.08. In the Income Tab, Interview Notebook in FACS, code $940.08.

Example 2:  S-Corporations

Mr. Smith applies for SNAP benefits for his household of himself, spouse, and 3 children. He has been self-employed for 4 years and has provided his 2018 tax return. All pay is representative. The tax forms indicated that Mr. Smith has an S-Corporation. He receives a salary from the business. He also receives profit sharing.

  • Review W-2 form if client receives a salary from the business.
  • Review Schedule K-1 if the client receives profit sharing.

In this example the W-2 form shows $28,000 on Line 1.

Also, the K-1 form shows a profit sharing of $3,000 on Line 1.

$28,000 / 12 = $2333 to be coded in the Earned Income Tab of FACS. $3,000 / 12 = $250 to be coded as other unearned income.

Example 3A: Farm Income

Kenny Nelson states that he is self-employed as a farmer. He declares a $5,000 loss for the last year and provided his tax forms for verification. He also has a part-time job at City Hall with a gross monthly earned income of $2100.

  • Review Schedule F, Line 34 Net farm profit or (loss)
  • Determine how long the client has been self-employed as a farmer.
  • If a person involved in farm income declares a loss, do not enter any self-employment income.

In this example, the yearly loss is annualized as $5,000 / 12 = $416.67.

Subtract monthly loss from earned income $2100 – $416.67 = $1683.33.

Enter $1683.33 as earned income block in the Income Tab and do NOT enter any self-employment income in the Monthly Self-Emp Income block.

FACS Income Screen with $1,683 entered in Countable Earned (PS2) field.

Example 3B: Farm Income

Ricky Nelson states that he is self-employed as a farmer. He declares a profit for the last year and provided his tax forms for verification. He declares no other sources of income.

  • Review Schedule F, Line 34 Net farm profit or (loss)
  • Determine how long the client has been self-employed as a farmer.

Farm income tax form example.

When line 34 shows a profit, use line 9 to determine net self-employment income.

In this example, $122,175 is annualized: $122,175 / 12 = $10,181.25.

Consider the 50% percent for expenses: $10,181.25 /2 = $5090.63.

$5091 is entered in the Monthly Self-Emp Income block.

Example 4:  Capital Gains

Carrie Lambert provided tax forms 1040 and Schedule D which displayed capital gains for the tax year.

  • Review Line 13 on Form 1040 and Line 16 on Schedule D.
  • Take the amount and divide the income by 12 to determine the monthly amount

In this example the 1,200 is prorated to a monthly amount of $100.

Code the income as unearned – Other Category.

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