To simplify self-employment income for S-Corporations, the process is divided by whether the client receives Supplemental Security Income (SSI) and how to calculate their specific share of the business.
Clients Receiving SSI
For any client receiving SSI (even a small amount), the worker must follow the Social Security Administration’s determination:
- Countable Income: Use the amount shown in Block 16: Earned Income.
- Calculation: This figure already reflects business income after expenses and SSI-applied deductions have been subtracted.
Clients NOT Receiving SSI
For all other clients, workers must manually determine the client’s share of the S-Corporation to avoid double taxation issues.
Step 1: Identify Ownership Percentage
- Locate Schedule K-1, Part II, Line F (see example form at the bottom of this article).
- This percentage represents the client’s share of the corporation’s income, deductions, and losses.
Step 2: Calculate Share of Income and Expenses
- Apply the ownership percentage from Schedule K-1 to the gross income and allowable expenses found on Form 1120S.
- This determines the specific portion of the business to consider for the client.
Data Entry Requirements
Workers must enter the calculated figures into the system based on the specific case type:
- General Self-Employment: Enter the calculated income and business expenses in the appropriate self-employment fields for all programs.
- SoonerCare (Medicaid) related to ABD: You must also complete the Non-TANF Work Expense and General Income Exclusion fields.
- Rental Income:
- *Unearned: If the income is strictly rental income, enter it on the “Other” line.
- Earned: If the client manages the property at least 20 hours per week, enter it in the self-employment and business expense fields.
Summary Checklist for Workers
| If the client… | Then do this… |
| Receives SSI | Use the amount in Block 16 Earned Income
|
| Does NOT receive SSI | Use Schedule K-1 (Line F) and personal return to find the ownership % and apply it to Form 1120S
|
| Manages Rental (20+ hrs/wk) | Treat as Self-Employment income.
|
| Has Passive Rental Income | Treat as Unearned Income (enter on “Other” line).
|
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