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Seasonal and Annualized Self-Employment

When a person is self-employed for only part of the year, determine if the self-employment falls into a seasonal or annualized pattern. The difference between seasonal or annualized self-employment is the time period during which the self-employed person intends to support the household.

  • A seasonally self-employed person only intends to support the household with this self-employment during the time period he or she receives pay. He or she has an alternative means of supporting the family during the remainder of the year.
  • An annually self-employed person intends the pay he or she receives during only part of the year to support the household throughout the entire year.

Use the household's statements at the interview and the self-employed person's verification to help make this evaluation.

Seasonal Calculation

Divide any self-employment income over the time the client supports him or herself with this income.

  1. Use the gross self-employment income shown on the person's federal income tax return or calculate the annual gross self-employment amount by using the client's business records.
  2. Ask if there are self-employment expenses. If the client claims business expenses, subtract 50% from the client's gross self-employment income.
  3. Divide the income by the number of month's the person spends doing his or her self-employment each year. Consider the partial first month a person is performing self-employment as a full month when considering how many months a person has worked in the past year.

Annual Self-Employment Calculation

Average any self-employment income across a full year.

  1. Use the gross self-employment income shown on the person's federal income tax return or calculate the annual gross self-employment amount by using the client's business records.
  2. Ask if there are self-employment expenses. If the client claims business expenses, subtract 50% from the client's gross self-employment income.
  3. Divide his or her annual self-employment income by 12 months.

Remember to meet the need factor using self-employment a parent or caretaker must meet the minimum wage requirement based on his or her net income.  

Removing Income

Seasonal self-employment only supports the household when a person is working. The client's payments mirror his or her work, and this income only stays on the benefit as long as the client is performing this work and receiving payments. When you verify that the client has stopped seasonal self-employment, remove this income from the benefit. Due to annual certification periods and the reporting rules, you will usually only run into this income when the household is receiving it at certification or renewal.

On the other hand, you only remove annual self-employment after verifying the self-employed person will no longer engages in this work. Annual self-employed persons save the money they receive in part of the year to support the household for the entire year. They may only receive one large payment that supports the household throughout the year. This income remains on the case even when household is not expecting another payment until the next year, so you must confirm the end of the self-employment before removing this income.

Example 1:

Nigel, aged 32, applies for Child Care for his four-year-old daughter Lucille. Nigel has operated a holiday clothing business for the last 2 years. He produces and sells holiday clothing throughout the year. He reports his sales increase around the Fourth of July, Christmas, and Halloween holidays, but he offers his merchandise year round. Nigel reports business expenses and provides a copy of his 2017 tax return. Nigel applies for Child Care on May 5, 2018. He reports approximately the same income from year-to-year. His gross income from last year was $25,000. How much of Nigel's income is countable? Should you use the seasonal or annualized calculation for this income?

This income is not income that qualifies as seasonal or annualized income. Nigel is performing self-employment throughout the year, so the monthly income calculation is appropriate. Nigel's countable income is $1041.67. His gross income is $25,000. Accounting for business expenses lowers this amount to $12,500. $25,000/2=$12,500. The monthly amount is $1,041.67.  $12,500/12=$1041.67.

Example 2:

Georgia, aged 41, applies for Child Care for her two-year-old daughter Tess on May 01, 2018. For the past three summers, Georgia has mown lawns. During the school year, she attends the University of Central Oklahoma. She is a senior business major. Last year, Georgia worked May through August. She did not keep records but estimates she earned $6,000 last summer. She did not file taxes on this income. She supplies her own gasoline and mower and does not work during the school year. She uses her student aid to support her during the school year. Her lawn mowing income meets her needs only during the summer. What income should you count toward the Child Care benefit?

$750. This is seasonal work. Georgia uses her lawn mowing income to support her during the summer vacation. She uses her student aid to support herself while she attends school. She does not have verification of last year's earnings, so you must accept her best estimate of her income. You must average Georgia's income based on last year's projection to anticipate her earnings for this year.  $6,000/2=$3,000/4=$750. Be aware Georgia must earn more than the minimum wage. 

Example 3:

Antwan, aged 27, applies for Child Care for his one-year-old son Joel. Antwan is a painter. He sells his paintings at craft shows and must provide paint and other supplies. He explains he has been painting for the past 4 years but has not filed taxes. He provides his sales records for the past 12 months. His sales records show he did not receive any sales in December or January. Antwan reports there were not any craft shows during these months. He explains there is always a slow period during each year, but he saves some money to help him get through it. His records show he earned $28,000 last year. What income counts toward Joel's Child Care eligibility?

$1166.67. Antwan uses his painting income to support his household not only when he is receiving payments but also when he is not making any sales. You must annualize his self-employment income. You must allow for business expenses and divide his annual earnings by 12. $28,000/2=$14,000/12=$1166.67.

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