340:40-7-11. Sources of income considered
(a) Income sources considered. Income may be received periodically or at irregular intervals. All income, unless specifically excluded, per Oklahoma Administrative Code (OAC) 340:40-7-12, is considered in determining monthly gross income. Income is classified as earned or unearned income. • 1
(b) Earned income. Earned income is the total money a person receives from wages, salary, commission, or profit from activities he or she engages in as a self-employed person or as an employee. • 2
(1) Wages. Wages include total money earned for work performed as an employee including armed forces pay, commissions, tips, piece-rate payments, longevity payments, and cash bonuses before deductions, such as taxes, bonds, pensions, union dues, credit union payments, or cafeteria plans are subtracted. • 3
(A) Countable military personnel wages include any allowance included on the earnings statement, except the Basic Allowance for Housing (BAH). • 4
(B) Only the portion of the cafeteria plan the client controls, including any excess benefit allowance payments, is counted as income. • 5
(C) Reimbursements for expenses, such as a uniform allowance or transportation costs, other than daily commuting, are subtracted from the gross income.
(D) Payments made for annual leave, sick leave, or severance pay are considered earned income during the month such income is received, whether paid during employment or at employment termination.
(E) Wages that are garnished or diverted and paid to a third party are also counted as income.
(2) S corporations. When a household member is a shareholder in an S corporation, he or she may receive profits from the business in three ways; as a salary, as a profit share of the business, or both. Both types of income are reported on the household member's personal income tax return. Salary income is considered as earned income and profit share income is considered as unearned income, per (c)(11) of this Section. • 6
(3) Self-employment. Self-employment income is calculated based on procedures listed in (A) through (H) of this subsection. • 7
(A) Persons considered self-employed. A person is considered self-employed when:
(i) he or she declares himself or herself to be self-employed;
(ii) there is an employer/employee relationship and the employer does not withhold income taxes or Federal Insurance Contributions Act, even when required to do so by law; or
(iii) the employer withholds taxes and the person provides proof he or she files taxes as self-employed.
(B) Records used and income calculation. The worker uses the records described in (i) through (iii) of this subparagraph to calculate income. When the person reports a loss instead of a profit on the business, the worker does not deduct the loss from other household income.
(i) When the person filed a federal income tax return for self-employment income for the most recent year, whether the person's income is derived from his or her own business or from working for an employer, the worker uses the gross self-employment income shown on the person's federal income tax return. The worker subtracts 50 percent of the income for claimed business expenses, and divides the income by 12 or, when the self-employment income was received for less than the full calendar year, by the number of months the business has existed or the number of months since the person started working for the employer. The worker verifies the person's start date with the employer when the person states he or she has not worked for the employer for at least 12 months.
(ii) When the person did not file an income tax return for the most recent tax year for his or her own business, the worker calculates self-employment income by using the person's business records for the last 12 months or the number of months the business has existed when less than 12 months. When the client declares business expenses, the worker subtracts 50 percent of the gross self-employment income to arrive at the net profit.
(iii) When the person works for an employer, did not file a federal tax return as self-employed, and receives earnings from an employer, the person must provide proof of the last 12 months of income from the employer. The worker divides the gross income by 12 or the number of months the person worked for the employer to determine monthly income. When the person declares business expenses, the worker subtracts 50 percent of the gross self-employment income before dividing the income by the applicable number of months to determine monthly income.
(C) Profit sharing. Households who operate S corporations, general or limited partnerships, or limited liability companies (LLC) may receive profit sharing that is reported on the household's personal income tax return.
(i) S corporation profit sharing is considered unearned profit-sharing income. Refer to OAC 340:40-7-11(b)(2) and (c)(11) for information regarding S corporations.
(ii) Partnerships are unincorporated businesses with two or more partners. When a household member is a partner in a business, he or she is considered self-employed and not one of the business's employees. Each partner receives a profit share from the business. When a business is considered a: • 8
(I) general partnership or LLC with a member-manager, each partner's share of the business income is shown as self-employment income on his or her federal income tax form; or • 9
(II) limited partnership or other LLC member, each partner's share of the business income is shown as self-employment income or unearned profit-sharing income on his or her federal income tax form. • 10
(D) Monthly self-employment income. Self-employment income received on a monthly basis is normally averaged over a 12-month period. When the averaged amount does not accurately reflect the household's actual monthly circumstances because the household experienced a substantial increase or decrease in income, the worker calculates the self-employment income based on anticipated earnings. • 11
(E) Seasonal self-employment. Self-employment income intended to meet the household's needs for only part of the year is averaged over the time period it is intended to cover. • 12
(F) Annualized self-employment income. Self-employment income that represents a household's annual support is averaged and annualized over a 12-month period, even when the income is received in a short time period.
(i) When the average annualized amount does not accurately reflect the person's actual monthly circumstances because the person experienced a substantial increase or decrease in income, the worker calculates the self-employment income on anticipated earnings.
(ii) The worker does not calculate self-employment income on the basis of prior earnings, such as income tax returns, when an increase or decrease of business has occurred. • 11
(iii) When the person received the self-employment income for less than 12 months, the worker averages the income over the applicable number of months and projects the monthly amount for the coming year. • 13
(G) Rental property income. Rental property is considered self-employment income. • 14
(H) Room and board income. Payments from roomers or boarders are considered self-employment when the roomer or boarder pays a reasonable amount.
(4) On-the-job training (OJT). OJT income from regular employment is considered earned income. This includes OJT provided, per Section 3(44) of the Workforce Innovation and Opportunity Act (WIOA), for persons 19 years of age and older. This does not include classroom or institutional training or WIOA-sponsored intern assignments, even when an hourly amount is paid for such training, per OAC 340:40-7-12(25)(G). • 15
(5) Title I payments of Domestic Volunteer Services Act (DVSA). Payments under Title I of the DVSA of 1973 as amended, per Public Law 93-113, are considered earned income unless excluded, per OAC 340:40-7-12.
(6) Children's earnings. A minor parent's earned income is treated as adult earned income. Earnings of other children 17 years of age and younger who are under an adult household member's parental control are excluded, per OAC 340:40-7-12. • 16
(7) Sale of whole blood or plasma. The sale of whole blood or blood plasma is considered as earned income.
(8) Training allowances. Training allowances from vocational or rehabilitative programs recognized by federal, state, or local governments, such as the work incentive program, are considered as earned income to the extent they are not a reimbursement. Training allowances received under WIOA are excluded.
(c) Unearned income. Unearned income is income a person receives for which the person does not put forth any daily, physical labor. Types of income listed in (1) through (11) of this subsection are considered unearned income. • 17
(1) Assistance payments. Assistance payments include state means-tested programs, such as Temporary Assistance for Needy Families (TANF), including Supported Permanency benefits, State Supplemental Payment (SSP) to the aged, blind, or disabled, and Refugee Resettlement Program (RRP) cash assistance. • 18
(2) Pensions, disability, and Social Security benefits. Annuities, pensions, retirement benefits, disability benefits from either government or private sources, or Social Security survivor benefits are considered unearned income.
(A) When a minor child receiving Social Security benefits no longer lives with the payee receiving the Social Security benefits, only the portion of the child's Social Security benefit used to meet the minor child's needs is considered income. This may include cash given directly to the minor child or money paid to a third party for the minor child's room and board.
(B) The parent or caretaker or, when appropriate, the minor child must take action to become the payee within the 12-month eligibility period, per OAC 340:40-7-9(d). When the parent, caretaker, or minor child does not take action by renewal, the worker counts the total Social Security benefit as income.
(3) Supplemental Security Income (SSI). SSI is considered unearned income. • 19
(4) Unemployment and workers' compensation. Income from unemployment insurance benefits or workers' compensation is counted as unearned income.
(5) Child support, court-ordered or third party paid child care, and alimony. Child support, child care payments, and alimony payments, whether court-ordered or voluntary, made directly to the household from non-household members are counted as unearned income. • 20
(A) Child care payments paid directly to the child care provider are not considered countable child support income.
(B) When the non-custodial parent reports he or she pays a portion of the client's family share copayment to the child care provider, it is not considered countable child support income.
(C) When the non-custodial parent or another third party, such as an employer, makes a payment to the child care provider in addition to the client's copayment, it is considered an additional copayment. Oklahoma Human Services (OKDHS) subtracts the additional copayment from the subsidy payment OKDHS owes to the child care provider. • 21
(D) Any other payment made to a third party for a household expense is considered as countable child support income when a court order directs the payment be made to the household. Payments for medical support are excluded.
(6) Veterans' compensation, pensions, or military allotments. Disability compensation, military allotments, servicemen dependent allowances, and similar payments are considered unearned income. • 22
(7) Contributions. Appreciable cash contributions recurrently received are considered unearned income except when the contribution is not made directly to the client. To be appreciable, a contribution must exceed $30 per calendar quarter per person.
(8) Dividends, interest, minerals, and royalties. Dividends, interest income, income from minerals, royalties, and similar sources are considered unearned income. When income from these sources is received irregularly or in varied amounts, it is averaged over 12 months. Income from royalties is treated as unearned, self-employment income, subject to (b)(2) of this Section.
(9) Lump sum payments. Recurring lump sum payments, including income from earnings, are averaged over the period they are intended to cover. • 23
(10) Irregular income. Income received irregularly that exceeds $30 per calendar quarter is considered income unless it is from an excluded income source specifically mentioned at OAC 340:40-7-12. Countable irregular income is averaged over 12 months. • 23
(11) Profit sharing. When a household member is a shareholder in an S corporation or a partner in a limited partnership or an LLC, he or she may receive a distribution or profit share of the business. This is considered as unearned income. • 25
INSTRUCTIONS TO STAFF 340:40-7-11
1. (a) When a child is adopted through the Oklahoma Human Services (OKDHS), refer to Oklahoma Administrative Code (OAC) 340:40-7-12(6) to determine whether to exempt household income for the child.
(b) When a child attends an Early Head Start-Child Care Partnership grant program or an Oklahoma Early Childhood Program, refer to OAC 340:40-7-12(7) to determine whether to exempt household income.
(1) All income sources must be considered and the client determined eligible, per OKDHS Appendix C-4, Child Care Eligibility/Copayment Chart, prior to exempting the household income.
(2) To exempt income when determined eligible, the worker enters all household income in the "total diverted income" field E47 on the Family Assistance/Client Services (FACS) Child Care Tab.
2. When the client does not earn at least minimum wage, refer to OAC 340:40-7-8(a)(3) to determine if the client meets the employment need factor.
3. The worker averages wages over a minimum of the last 30-calendar days unless wages are not indicative of future earnings. Refer to OAC 340:40-7-13 for information on computing income. The worker records income information in the FACS Interview Notebook Income tab.
4. The Supplemental Nutrition Assistance Program (SNAP) counts the Basic Allowance for Housing (BAH) as earned income, per OAC 340:50-7-29(b)(1). When the family receives Child Care Subsidy and SNAP, the worker enters the BAH as part of the military person's earned income in the "earned income" field of the FACS Eligibility Notebook Household tab and enters the BAH amount in the "total diverted income" field E47 of the FACS Eligibility Notebook Child Care tab. This ensures the BAH counts as earned income for SNAP and is excluded as income for Child Care Subsidy. Refer to the Quest article "Income – Military Pay" for more information regarding the military person's Leave and Earnings Statement.
5. When the employer adds money to the employee's gross income as a benefit allowance to pay for a reimbursable expense, such as insurance, the worker counts the regular gross earnings plus excess money left after deducting the insurance or other reimbursable expense from the benefit allowance. For example, when a person:
(1) receives a $300 benefit allowance to purchase insurance and uses the entire amount to purchase the insurance, none of the benefit allowance is counted as income;
(2) receives a $300 benefit allowance but only purchases $280 in insurance, the worker counts the remaining $20 as income;
(3) has an option to purchase insurance with a $300 benefit allowance or receive a cash payment of $150 instead of purchasing insurance and chooses the cash payment option, the worker counts the $150 as an excess benefit allowance;
(4) receives any excess benefit allowance at the end of the year instead of monthly, the worker excludes the one-time payment as income because it is considered a non-recurring lump sum payment, per OAC 340:40-7-12(1).
6. Shareholders of S corporations complete Form 1120-S, U.S. Income Tax Return for an S Corporation with Schedule K-1, Shareholder's Share of Income. When the household member is a shareholder and receives a salary from the business, the household member must supply a copy of his or her W-2, Wage and Tax Statement. Line 1 on Form W-2 shows the household member's annual wages for the tax year. To calculate the household member's monthly income, the worker divides the income shown on line 1 by 12 or the number of months the S corporation existed during the tax year.
7. (a) Capital gains income is excluded as income for subsidized child care benefits. Refer to OAC 340:50-7-30(b)(1) for food benefits.
(b) Persons who own an interest in a corporation do not qualify for the business expense deduction as they do not have individual business expenses.
(c) Income tax documents provide acceptable documentation of self-employment income and expenses. Income tax return forms include, but are not limited to:
(1) Form 1040 with Schedule C, Profit or Loss From Business (Sole Proprietorship), for sole proprietors and some limited liability companies. The worker uses the gross income shown on line 3 of Schedule C as the household's annual self-employment income. The worker divides the income by 12 or the number of months the business existed in the tax year to arrive at the monthly gross income and allows a 50 percent deduction for claimed business expenses;
(2) Form 1065, Partnership Return of Income, with Schedule K-1. Refer to Instructions 7 through 9 of this Section for calculation information; and
(3) Form 1040 with Schedule F for farmers. The worker uses the gross income shown on line 9 of Schedule F to determine farm income and line 34 to determine the farm's net loss or profit. When line 34 shows a profit, the worker uses line 9 and determines net monthly income the same as all other self-employment income.
(d) The worker subtracts the 50 percent business expense deduction before entering the net self-employment income in the "Monthly Self-Emp Income" field of the FACS Income tab. No entry is made in the "Monthly Business Expense" field.
(e) The worker documents how the countable income was calculated in FACS Case Notes.
8. The worker looks at line G on Schedule K-1 (Form 1065), Partner's Share of Income, to determine if a partnership is a general partnership/limited liability company (LLC) member-manager or a limited partnership/other LLC member.
9. When the household member is a partner in a general partnership or LLC member-manager, the worker adds together the income shown on lines 1, 4, and 14C of Schedule K-1 (Form 1065) to determine his or her annual gross self-employment income. The worker subtracts 50 percent of the income for business expenses and divides the remaining income by 12 or the number of months the business existed in the tax year to calculate the household member's gross monthly self-employment income. The worker codes the income in the FACS Income Tab as self-employment and documents income calculations in FACS case notes.
10. (a) When the household member is a partner in a limited partnership or other LLC member, the worker adds together the income shown on line 4 and line 14C of Schedule K-1 (Form 1065) to determine his or her annual gross self-employment income. The worker subtracts 50 percent of the income for business expenses and divides the remaining income by 12 or the number of months the business existed in the tax year to calculate the household member's gross monthly self-employment income. The worker codes the income in the FACS Income tab as self-employment and documents income calculations in FACS case notes.
(b) The worker uses the 'ordinary business income' shown on line 1 of Schedule K-1 and divides the income by 12 or the number of months the business existed in the tax year to calculate at the household member's monthly gross unearned income from profit sharing.
11. (a) When the client states that his or her income increased or decreased, the worker uses whatever income is representative of future earnings to determine the family share copayment.
(b) When the client has not received income from the self-employment income source, no income is considered, per OAC 340:40-7-10, until the client receives income. When the client has not received income, refer to OAC 340:40-3-1(b) for 30-calendar day presumptive eligibility processing.
(c) To average the income and expenses for self-employment income received for less than a full year, the worker divides the total income by the number of months received. For example, when the client receives self-employment income from February 18 to the November application month, the worker averages the income for nine months, from February through October. When computing an annualized figure for a new self-employment income, the worker counts the first month the client receives income through the last complete month.
(d) The worker documents how income was calculated and why the full 12-month average was not used in FACS Case Notes.
12. (a) When the person is self-employed only during the summer months and works as an employee for someone else during the rest of the year, the worker averages the self-employment income only for the summer months.
(b) The worker does not count income from a new source until the person receives income from this source. When the client had this same seasonal business the prior year, the worker anticipates income for the first month based on the prior year's income records unless it is not representative. The worker documents how income is calculated in FACS Case Notes.
13. When the person is considered self-employed as a contract laborer, receives a set salary that does not vary, and there is sufficient data available from the employer to make a reasonable income projection, but the data is not sufficient enough to annualize income, earnings are anticipated by multiplying the amount received by the appropriate conversion factor. For example, the client starts a new self-employment contract labor job, works 40 hours per week at $10 per hour, and received receives two weekly checks in the amount of $400 each. The month is not over, but the employer states the person will continue to be paid $400 per week. At application, the worker uses 400 X 4.3 to anticipate the person's monthly income. At renewal, the worker averages the income over the number of months received until a full year's information is available.
14. Income from rental property is considered self-employment income whether the client or an outside source manages the property. There is no minimum number of hours the client must manage the property for the income to be considered self-employment. The client is eligible for a 50 percent business expense when the client claims expenses, such as the mortgage of the rental property. Example: A client collects $900 rent per month from a rental property and pays a $650 mortgage payment on the property. Since the client has business expenses, the worker considers 50 percent of the $900 as countable income and enters $450 self-employment earned income in the 'self-employment' field of the FACS Interview Notebook Income tab. The worker also enters a FACS case note explaining income calculations.
15. This provision does not apply to household members 18 years of age and younger under another adult household member's parental control regardless of school attendance. For this provision's purpose, earnings include monies paid under the Workforce Innovation and Opportunity Act and monies the employer pays.
16. A child turning 18 years of age is considered an adult for child care purposes. When the child is a sibling to the child needing subsidized child care benefits, the 18 year old sibling's income is not counted. Refer to OAC 340:40-7-6 regarding household composition and income consideration, and OAC 340:50-5-1 regarding who must be included in a household for food benefits.
17. Refer to OAC 340:65-3-4 regarding ways to verify and document unearned income.
18. Recipients of these assistance programs are predetermined eligible with a zero family share copayment for the subsidized child care benefits, per OAC 340:40-7-1.
19. (a) A recipient of Supplemental Security Income (SSI) is predetermined eligible with a zero family share copayment for subsidized child care benefits, per OAC 340:40-7-1.
(b) The worker considers the SSI income and counts the child in the family size when determining the family share copayment for other household members.
20. (a) The worker obtains copies of any established court orders.
(1) When the client states he or she receives any of these income types, the worker speaks to the person providing this assistance or obtains the person's written statement regarding all payment dates and amounts made within the last 60-calendar days.
(2) When the client receives sporadic or varying amounts of support, the worker may average income over a longer time period and document his or her reasoning in FACS Case Notes.
(b) To determine if these payments are paid through Child Support Services, the worker uses the Information Management System (IMS) and enters Social Security number (SSN) space and the client's SSN to find the family group number (FGN). The worker enters CSML space FGN to display the "case status monitoring list." The worker tabs down to the custodial parent (CP) who is the payee for the child care benefit, types KI1 next to the CPs name, and presses enter to view a list of payments received. For an explanation of the FGN, enter M space CSMLDATA; and transaction KI1 information, enter M space KI1.
(c) The worker codes child support income on the child for whom it is received when the child is considered a household member. When the client receives child support for a child not included in the household, it is coded as a contribution to the client. When child support income is received for the care and maintenance of a third party, refer to OAC 340:40-7-12(12).
(d) When the non-custodial parent pays a portion of the client's family share copayment and the client receives food benefits, the portion the non-custodial parent pays is not considered a dependent care cost for the Supplemental Nutrition Assistance Program (SNAP), per OAC 340:50-7-31(b)(4).
(e) The worker excludes money paid directly to household expenses that are not court-ordered to be paid to the client. For information on how this income is considered for SNAP, refer to OAC 340:50-7-29(c)(3).
(f) The worker documents how child support is verified and calculated in FACS case notes.
21. (a) When someone outside the client's home pays a portion of the child care cost directly to the child care provider and states this money is in addition to the client's family share copayment, the worker enters this additional copayment in the FACS Eligibility Notebook Child Care tab, "Court-ordered" field E55. When a dollar amount is entered in field E55, OKDHS does not make a payment to the child care provider until the family share copayment and the additional copayment is first applied to the cost of care.
(b) The worker sends Form 08MP038E, Client Notice of Action Taken, to the client and the child care provider notifying them that an additional copayment is being paid by someone other than the client in addition to the client's family share copayment.
(c) When the person stops paying the additional copayment, the worker removes the additional copayment from the "Court-ordered" field E55 and emails Form 10EB004E, Report of Electronic Benefits Transfer (EBT) Child Care Payment Adjustments, to the email address on the form to request an adjustment to the child care provider's pay.
22. Military benefits considered educational assistance are excluded.
23. (a) Non-recurring lump sum payments are excluded as income, per OAC 340:40-7-12.
(b) Examples of recurring countable lump sum payments include gambling winnings received on a consistent basis where the client has an established gambling pattern, earnings received less often than monthly, sporadic child support payments, or dividend payments.
24. An example of irregular income is gambling winnings that are received on a consistent basis where the client has an established gambling pattern.
25. (a) To calculate the household's profit-sharing income from an S corporation, the worker uses the 'ordinary business income' shown on line 1 of the Schedule K-1, Shareholder's Share of Income, and divides the income by 12 or the number of months the business existed in the tax year to arrive at the monthly gross unearned income.
(b) When a household member is a partner, the worker looks at line G on Schedule K-1, Partner's Share of Income that accompanies Form 1065, Partnership Return of Income, to determine the partnership type. When it shows the business is a limited partnership or limited liability company, the worker uses the 'ordinary business income' shown on line 1 of Schedule K-1 and divides the income by 12 or the number of months the business existed in the tax year to arrive at the monthly gross unearned income. When line G shows the business is a general partnership, refer to OAC 340:40-7-11(b)(3)(C) to calculate the income as self-employment income.
(c) The worker codes the profit-sharing income in the FACS Income tab and enters a FACS case note to document income calculations.
(d) To average the income and expenses for self-employment income received for less than a full year, the worker divides the total income by the number of months received. For example, when the client receives self-employment income from February 18 to the application month of November, the worker averages the income for nine months, from February through October. It is correct to count the first month the client receives income through the last complete month when computing an annualized figure for a new self-employment income.
(e) The worker documents how income was calculated and why the full 12-month average was not used in FACS Case Notes.