Use this guide to determine and calculate SNAP self-employment income for partnerships and limited liability companies (LLC’s)

Partnerships consist of two or more people who agree to conduct a trade or business. Members share profits and losses. The IRS does not tax the business, instead each partner pays taxes individually.

Limited Liability Companies (LLC’s) are a corporate structure that protects its owners from responsibility for repayment of the company’s debt and liabilities. LLC’s can be single-member (one owner) and typically file taxes as a sole proprietorship, or multi-member (two or more owners) and typically file taxes as a partnership.

Profit shares or distributions may be received from a Partnership or LLC and may be considered either self-employment income or unearned income, depending on the individual’s role and level of participation in the business.

• When the partner’s Schedule K-1 (Form 1065) includes self-employment income, the partner’s share is considered self-employment income.
• When the partner’s Schedule K-1 (Form 1065) does not include self-employment income, the partner’s share is considered unearned income.

Step 1: Self-Employment Details

Ask the client:

• What type of work is being done, how long this has been happening and what type of business is declared?
  • We want to understand the work, the length of time, and how they declare the business in order to ask for the correct verification and income
• Are taxes filed and what are they? Individual taxes, business taxes, or both?
  • If both types are filed, both tax returns should be requested
• Is your most recent tax return representative of your current income?
• Are there business expenses associated with this self-employment income?

Step 2: Verification

Single-member LLC’s typically do not file a separate business tax return

• See Sole Proprietorship article for instructions

Partnerships and multi-member LLC’s typically file a separate business tax return

• Form 1065 (S. Return of Partnership Income)
• Schedule K-1 (Form 1065)

Step 3: Calculate the Income

Determine whether the partner is self-employed

Review Schedule K-1 (Form 1065), line 14

• If any amount is declared on line 14 (14a, 14b, or 14c), the partner is self-employed. Any profit shares are considered self-employment income.
• If lines 14a, 14b, and 14c are blank, the partner is not self-employed. Any profit shares are considered unearned income.

Calculation 1: Line 14b or 14c has an amount

The partner is self-employed

• Add line 14b + line 14c to determine gross self-employment income
• Divide by 12 months
  • Or actual number of months in business, if less than one year
• Deduct 50%, only if business expenses are declared
• Enter the total in the FACS Income tab, under the Monthly Self-Employment Income block (C39/F64)
  • For SNAP, do not enter an amount in the Monthly Business Expense block (C40/F66)
• Document the entire income calculation in case notes

Calculation 2: Line 14a has an amount, but lines 14b and 14c are blank

The partner is self-employed

• On Form 1065 (U.S. Return of Partnership Income), locate line 8, Total income (loss)
• On Schedule K-1, locate:
  • Line J – Partner’s share (ownership percentage)
  • Line 4c – Total guaranteed payments
• Multiply Form 1065, line 8 by the partner’s ownership percentage (K-1, line J)
• Add K-1, line 4c (guaranteed payments) to determine gross self-employment income
• Divide by 12 months
  • Or actual number of months in business, if less than one year
• Deduct 50%, only if business expenses are declared
• Enter the total in the FACS Income tab, under Monthly Self-Employment Income block (C39/F64)
  • For SNAP, do not enter an amount in the Monthly Business Expense block (C40/F66)
• Document the entire income calculation in case notes

Calculation 3: Lines 14a, 14b, and 14c are blank

The partner is NOT self-employed

• Add the amounts reported on K-1, lines 1, 3, 4c, 5, 6a, 6b, 7, 9b, 10, and 11 to determine total unearned income
• Divide by 12 months
  • Or actual number of months in business, if less than one year
• Enter the total in the FACS Income tab, under Unearned Income – Other block (C45/
  • Set the indicator to Other Counted Unearned Uncome
• Document the entire income calculation in case notes

Taxes not available or not representative

If the client declares they do not file taxes or the business is new and taxes have not yet been filed:

• Self-employment income must be verified using records from the past 12 months
• If self-employed for less than one year, records must cover the entire period of self-employment

If prior taxes are no longer representative due to significant increase or decrease in income:

• Self-employment income should be calculated using only the income that can reasonably be anticipated to project future earnings

Acceptable verification of monthly gross income may include:

• Accounting or sales software documents, app or website earnings records, or a written log provided by the client

Resources

• 340:50-7-30(b)(2)(B) Self-employed households, Profit Sharing & ITS 1, 4
• 340:50-7-29(c)(8) Income inclusions, Unearned income, Profit sharing & ITS 12(b)
• Income Calculations: Self Employment Overview
• Income – Self-Employment (Sole Proprietorship)