Minnesota Department of Human Services
Self-Employment
Handbook
Income
DAYCARE
Expense
s
TAXI DRIVER
CASH & Supplemental Nutrition
Assistance Program - SNAP
MNDHS Self-employment Handbook
Updated – 3/12
-1-
Self- Employment Handbook
Table of contents
Section
Page
01.0
Introduction
3
02.0
02.1
Definition of a Self-Employed Person
Self-Employment Ownership Types
4
5
03.0
03.1
Self-Employment Verification Sources
Tax Form Use by Ownership Type
7
9
04.0
Self-Employment Certification Steps
10
05.0
Excluded Assets Specific to Self-Employment
11
06.0
06.1
Calculating Self-Employment Income and Expenses
Special Self-Employment Income Situations
12
14
07.0
07.1
07.2
Self-Employment Expenses
Self-Employment Transportation Expenses
Self-Employment Business Expense or Shelter Deduction
16
18
20
08.0
Self-Employment Reporting and Acting On Changes
23
09.0
MAXIS Self-Employment Income Types
09.01 Farming
09.01.1 Farm Loss Offset
09.02 Real Estate
09.03 Home Product Sales
09.04 Other Sales
09.05 Personal Services
09.05.1 Personal Services – Taxi Drivers
09.06 Paper Route
09.07 In-Home Day Care
09.08 Rental
09.08.1 Roomer/Boarder Rental Income
09.09 Other
24
25
27
28
31
33
35
37
38
40
42
45
47
10.00
Self-Employment Related Terms and Definitions
49
11.0
Frequently Asked Questions
55
Links to worksheets can be found under each self-employment type section.
MNDHS Self-employment Handbook
Updated – 3/12
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SE 01.0 INTRODUCTION
Table of contents
Self-employment (SE) cases make-up approximately one percent of Minnesota’s Supplemental
Nutrition Assistance Program - SNAP case load and an even smaller percentage of MFIP and DWP
cases. Self-employment cases can be highly complex, time consuming and are potentially very error
prone.
This Handbook is designed to help alleviate some of the issues and questions surrounding
certification of self-employed households. It also provides you with tools (information, procedures and
forms) that will be useful in the certification of self-employed households.
Following the self-employment definition, the Handbook is divided into sections covering the steps to
certification, computing income, self-employment expenses and self-employment types. There is also
a list of self-employment terms and their definitions for your reference and a section of frequently
asked questions.
Lastly, the Handbook includes the following worksheets:
SE HWS 1 Business Use of Home Worksheet
SE HWS 1 Farming Worksheet
SE HWS 3 Sales / Services Worksheet
SE HWS 4 In-Home Day Care Worksheet
SE HWS 5 Rental Worksheet
SE HWS 6 Roomer / Boarder Worksheet
Self-employment forms included on DHS eDOCs are:
DHS-3336-ENG - Self-employment Report Form
DHS-3337-ENG - MFIP Self-employment Income Worksheet
Use this Handbook together with, not in place of, the Combined Manual (CM). Direct questions
about the information provided in this handbook to PolicyQuest.
MNDHS Self-employment Handbook
Updated – 3/12
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SE 02.0 DEFINITION OF A SELF-EMPLOYED PERSON
Table of contents
Use your best judgment on a case-by-case basis to determine if a person is self-employed or an
employee.
An individual is self-employed if they operate a business or profession as a sole proprietor, partner in
a partnership, or S Corporation, independent contractor, or consultant and draw income from the
trade or business. The person must demonstrate that he or she is in business for the purpose of
making a profit.
Self-employed persons:
 Incur costs in producing income. Deduct these costs in order to equate their income with income
from sources where there are no production costs.
 Control their work by working either independently of an employer, freelance or by running the
business.
 Assume all the risks and responsibilities of a business enterprise and are subject to selfemployment tax in addition to income tax on net income from self-employment activities. The selfemployment tax is paid in lieu of the Social Security payments.
Self-Employed or Employee Determination
Work Rules
Self-employed
Set by self-employed individual
Employee
Set by employer
Work Hours
Set by self-employed individual
Payment
By the job
Federal/State
Taxes, FICA
Number of clients
/employers
Tools/Materials
Not withheld from pay – selfemployed individual pays
Set by employer
By the hour or time worked, even
if job is not completed.
Location
Costs
Risk
Employer withholds from pay
Multiple
One Employer
Provided by self-employed individual
Multiple or owned by self-employed
individual
Paid by self-employed individual
Assumed by self-employed
individual
Provided by employer
Set by employer
Paid by employer
Assumed by employer
An individual's self-employed status is reinforced by:
 Obtaining an employer identification number from the IRS.
 Working under a business name
 Printing invoices, business cards, and stationery
MNDHS Self-employment Handbook
Updated – 3/12
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SE 02.1 SELF-EMPLOYMENT OWNERSHIP TYPES
Table of contents
Sole Proprietorship
The sole proprietorship is the oldest, most common, and simplest form of business organization. A
sole proprietorship is a business owned and managed by one person. A sole proprietorship can be
organized very informally, is not subject to much federal or state regulation, and is relatively simple to
manage and control.
In a sole proprietorship, the owner is:
 Inseparable from the business
 In complete control over the business,
 Financially and legally responsible for all debts and legal actions regarding the business
 Responsible for taxes which are determined at the personal income tax rate
Partnership
A partnership is the relationship existing between two or more persons who join to carry on a trade or
business. Each partner contributes money, property, labor or skill, and expects to share in the profits
and losses of the business. A partnership contract spells out the manner in which profits are to be
distributed.
A partnership can be a:
General Partnership: A general partnership has the following major features:
 It is formed by two or more general partners
 The partners are all liable for any legal actions and debts
 It is created by agreement
General partners have:
 Management control
 Share the right to use partnership property
 Share the profits of the firm in predefined proportions, and
 Have liability for the debts of the partnership
Limited Partnership: A limited partnership is a form of partnership that has one or more general
partners, and one or more limited partners.
Limited partners are partners that may invest in, but are not directly involved in, the management
of the partnership. They also have limited liability to the extent of their investments.
The general partner pays the limited partners the equivalent of a dividend on their investment, the
nature and extent of which is usually defined in the partnership agreement.
MNDHS Self-employment Handbook
Updated – 3/12
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Limited partnerships are different from limited liability partnerships in which all partners have
limited liability. (See below.)
Limited Liability Partnership: A limited liability partnership (LLP) has elements of partnerships and
corporations. In a limited liability partnership, all partners have a form of limited liability similar to
that of the shareholders of a corporation. However, the partners have the right to manage the
business directly, and (in many areas) a different level of tax liability than in a corporation.
A limited liability partnership is for businesses where all investors wish to take an active role in
management.
A partnership must file an annual information return (IRS Form1065 and 1065 K-1) to report the
income, deductions, gains, losses, etc., from its operations. A partnership does not pay income taxes.
The profits or losses are “passed through” to its partners. Each partner includes his or her share of
the partnership's income or loss on his or her tax return (IRS 1040).
Partners are not employees and should not be issued a Form W-2. The partnership must furnish
copies of Schedule K-1 (Form 1065) to the partners.
S Corporations
Also called Subchapter S Corporation.
Corporations are legal entities, and are responsible for their own debts and obligations.
An individual involved in an S corporation is considered self-employed. Individuals in all other
corporation types are considered employees. If the person receives a salary from the corporation, he
is considered an employee of the corporation.
An S corporation is a corporation with 100 shareholders or less that has the benefit of incorporation
while being taxed as a partnership. This means that any profits earned by the corporation are not
taxed at the corporate level, but rather at the level of the shareholders.
An S Corporation must file an annual information return (IRS Form1120 and 1120 K-1) to report the
income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. Profits or
losses are “passed through” to its shareholders.
Each shareholder includes his or her share of the partnership's income or loss on his or her tax return
(IRS 1040).
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.
Often incorrectly called a "limited liability corporation" (instead of company), it is a hybrid business
entity having certain characteristics of both a corporation and a partnership. The primary
characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it
shares with a partnership is the availability of pass-through income taxation.
MNDHS Self-employment Handbook
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Owners of an LLC are called members. Members may include individuals, corporations, other LLCs
and foreign entities. There is no maximum number of members and “single member” LLCs, (those
having only one owner) are allowed. A few types of businesses generally cannot be LLCs, such as
banks and insurance companies.
Business owners form a Limited Liability Company (LLC) to reduce their personal liability. If you
operate as a sole proprietor or partnership, you are personally responsible for any business debts or
lawsuits against your business. Nearly everything you own can be at risk.
When you set up an LLC, you separate your business and personal identities. This helps protect your
personal savings, your house, your car, etc. LLCs can also provide business owners with other
benefits like tax savings.
If an LLC has only one owner, treat the LLC as a sole proprietor. Similarly, an LLC with multiple
owners will, treated as a partnership.
An LLC does need an operating agreement that will specify how and by whom the company will be
managed, each owner's name, the amount of ownership interest held by each owner, etc. Similar to a
corporation, normal business expenses such as an owner's salary may be deducted from the profits
of an LLC before the LLC's income is allocated to its owners for tax purposes. Unlike a corporation,
an LLC is not required to allocate profits and losses in proportion to ownership interest ("member
interest'). This means that the owners of an LLC can agree to allocate the company's profits and
losses among themselves however, they see fit and not necessarily based on the percentage of the
company each owner controls
MNDHS Self-employment Handbook
Updated – 3/12
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SE 03.0 SELF-EMPLOYMENT VERIFICATION SOURCES
Table of contents
Always document the verification source used.
IRS TAX FORMS
When computing SNAP income and in the initial set up of MFIP/DWP in established businesses that
file income taxes, use the most recent income tax forms, schedules and statements. These forms are
good sources of information regarding self-employment income and expenses. However, income and
expenses may need to be adjusted as:
 MFIP and SNAP policy does not always match IRS rules
 The taxes are not always reflective of the current situation
 The taxes may not reflect a full year of business operation
Be aware of who prepared the tax forms – was the form self prepared or prepared by a
tax/accounting business. If the tax forms appear to have questionable information, obtain additional
sources of verification.
Common IRS forms used to determine counted self-employment income:
Form 1040, U. S. Individual Income Tax Return
Schedule C, Non-farm
Schedule C-EZ, Net Profit from Business (Sole Proprietorship)
Schedule D, Capital Gains and Losses and Reconciliation of Forms 1099-B
Schedule E, Supplemental Income Schedule
Schedule F, Farm Income and Expenses
Form 4797, Gains and Losses From Sales or Exchanges of Assets Used in a Trade or Business
and Involuntary Conversions
Form 4835, Farm Rental Income and Expenses
Form 8829, Expenses for Business Use for Your Home
Form 1065, U. S. Partnership Return of Income
Schedule K-1, Partners' Shares of Income, Credits, Deductions, etc.
Form 1120, U. S. Corporation Income Tax Return
Form 1120S, U. S. Income Tax Return for an S Corporation (Small Business)
Schedule K, Shareholders' Share of Income, Credits, Deductions, etc. (Summarizes the
corporation's income deductions, credits, etc., reportable by the shareholders.)
Schedule K-1, Shareholder's Share of Income, Credits, Deductions, etc. (Shows each shareholder's
separate share.)
Form 4506, Request for Copy of Tax Form
See www.irs.gov for current copies of tax forms and instructions.
For online access on information for a business entity such as legal styling, file number or
Organizational ID, filing type and city go to: http://da.sos.state.mn.us .
MNDHS Self-employment Handbook
Updated – 3/12
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CLIENT’S LEDGERS/BOOKS
For SNAP use a clients ledgers/books when computing income when the business has been in
operation for less than a year, the business that does not file taxes and for verification of income at
six month report.
For MFIP/DWP use a clients ledgers/books at initial set up when computing income if the business
has been in operation for less than a year, the business that does not file taxes and for ongoing
verification of monthly income.
DHS SELF-EMPLOYMENT REPORT FORM
The DHS-3336-ENG - Self-employment Report Form may be used in place of client ledgers/books for
self-employed MFIP/DWP and Uncle Harry cases.
If there is questionable information, obtain additional sources of verification such as (not an inclusive
list):
Account Statements
Sales Slips
Canceled Checks
Invoices
Purchase Orders
Cash Receipts
Collateral Contacts
Bankruptcy Trustee
Verification information documentation should include:
 the name and type of business
 the date
 the type and amount of income or expense, and
 any other pertinent information
MNDHS Self-employment Handbook
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SE 03.1 TAX FORM USE BY OWNERSHIP TYPE
Table of contents
Sole
Proprietor

Form 1040
Schedule C, E or F

Use info (adjust if
necessary) on Schedule
C, E or F to determine
self-employment income.
Partnership

- Form 1040
- Form 1065: Tax Return
For Entire Partnership
- Schedule K-1 (Form
1065). Each partner’s
share of income &
expenses is “passed
through” to him/her.
- Each partner uses his/her
Schedule K-1 to complete
the 1040.

Use figures (adjust if
necessary) on Schedule
K-1 and appropriate
1040 Schedule to
determine selfemployment income
S
Corporation

- Form 1040
- Form 1120 S Tax Return
For Entire S Corporation
- Schedule K-1 (Form
1120S). Each
shareholder’s share of
income & expenses is
“passed through” to
him/her.
- Each shareholder uses
his/her Schedule K-1 to
complete the 1040.

Use figures (adjust if
necessary) on Schedule
K-1 and appropriate
1040 Schedule to
determine selfemployment income.
C
Corporation

Form 1120 Corporate Tax
Return

Client is not selfemployed, use wages
to determine income.
Any of the above entities can also become a limited liability company (LLC) to limit
their personal liability in case they are sued. However, this has no affect on how their
income and expense are budgeted. Example: An owner of a pawn shop is a sole
proprietor and reports his income and expenses on Schedule C. If he becomes an
LLC, he would still report his income and expenses on a Schedule C.
MNDHS Self-employment Handbook
Updated – 3/12
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SE 04.0 SELF-EMPLOYMENT CERTIFICATION STEPS
Table of contents
□ Determine the income type of self-employment, using one of the nine categories from MAXIS.
See 09.0 MAXIS Self-employment Income Types.
□ Determine the client’s level of ownership in the business, sole proprietorship, partnership, or
corporation. See Self-employment OwnershipTypes.
□ Gather the appropriate business verification, records and/or tax forms. See Self-employment
Verification Sources.
□ Determine what the current business operation/situation is:
o Location of Principal Place of Business, see Self-Employment Related Terms and Definitions
o Client’s role/share of business
□ Review the business records or tax forms to determine if they are reflective of the current
situation.
□ Determine what time period the business verification covers.
□ For SNAP, determine how you are going to anticipate the net income - average or annualize. For
MFIP use rolling average.
□ Calculate countable net income (document your work):
On all income, ask:
o Will the income continue?
On all deductions ask:
o Is it allowable?
o Is it reasonable?
o Is it for business only?
o Will the expense continue?
CM 17.15.33.06
CM17.15.33.09
□ Enter calculated amounts on the appropriate MAXIS STAT panels.
□ Talk with your supervisor if you have any questions.
□ Contact PolicyQuest with questions you are unable to resolve.
MNDHS Self-employment Handbook
Updated – 3/12
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SE 05.0 EXCLUDED ASSETS SPECIFIC TO SELF-EMPLOYMENT
Table of contents
Exclude the following assets as appropriate when certifying for self-employment. The
exclusion applies even if the self-employed person is not making a profit. NOTE: For SNAP all assets
are excluded for categorically eligible units. The exclusions below apply to non-categorical eligible
SNAP units and MFIP/DWP units.
Non-homestead real property annually producing
income consistent with its fair market value.
Excluded
MFIP,
SNAP
DWP
Real property that is essential to the business.
Non-homestead real property (that causes excess
assets) with repayment agreement and executed
lien against the property.
Installment contracts, including contracts for deed
producing income consistent with their fair market
value.
Non-liquid asset with executed lien based on a
business loan.
Liquid assets that have been prorated as selfemployment income.
Business loans
Escrow bank account used at least annually for
operating a business
Assets essential to the Self- Employment (not
including real property)
Vehicles essential to the business operation
References
CM0015.12
CFR 273.8(e)(4)
CM 0015.12
CFR 273.8(e)(5)
Yes
NA
Yes
NA
NA
Yes
CM 0015.12.06
Yes
Yes
CM 0015.09
CFR 273.8.(e)(6)
Yes
CFR 273.8(e) 15
Yes
NA
CFR 273.8(e)(9)
In Month
of receipt
Yes
Yes
Yes
CM 0015.42
FSP Memo #92-05
Yes
Yes
CM 0015.09
Yes, if
licensed*
Yes
CM 0015.09 –
CM 0015.39
CFR 273.8(e)(3)(i)
(A), (B) & (G)(iii)
CFR 273.8(e)(3)(i)
(A), (B) & (G)(iii)
CM0015.39
Vehicles annually producing income consistent with
Yes, if
NA
its fair market value
licensed*
Vehicle is used 50% of time to produce income.
Yes
Yes
Liquid assets that have been prorated as selfYes
NA
CFR 273.8(e)(9)
employment income
Sealed Grain stored less than 12 months.
Yes
NA
Sealed Grain stored 12 months or more.
No
NA
Ending Self-employment business
Self-employment assets, up to one year, unless
NA
Yes
CM 0015.09
converted to cash
Self-employment assets converted to cash
NA
No
CM 0015.09
Farming business assets for one year.
Yes
NA
CM 0015.09
*On reservations that do not require vehicles to be licensed, treat unlicensed vehicles as licensed
vehicles.
MNDHS Self-employment Handbook
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SE 06.0 CALCULATING SELF-EMPLOYMENT INCOME AND EXPENSES
Table of contents
When computing self-employment income for SNAP and for the initial set up of MFIP/DWP, average
the income and expenses, regardless of whether the unit receives the income monthly or less often
than monthly. To compute self employment income for ongoing MFIP/DWP, use a monthly rolling
average.
For SNAP calculations CM 0017.15.33. 03:
Business in existence for one year or more
If a business has been in existence for one year or more, average the self-employment income and
expenses from the past year. Use the computed average figure into account any anticipated changes
which would affect the current net income.
Businesses in existence for one year or less
If the self-employment operation has been in existence for less than a year, average the business
income and expenses over the period of time the business has been in operation. Use the computed
average figure taking into account any anticipated changes which would affect the current net
income.
Business income covers partial year
If the self-employment income is intended to support the unit for only part of the year, averaged the
income over the period of time it is intended to cover taking into account any anticipated changes.
Examples of anticipated changes may include increases/decreases in:
 Number of employees
 Amount of land farmed
 Number of rental
properties
 Amount of time
 A substantial change in
 Number of day care
available to work
market prices
children
 The type of operation
 Business territory
For MFIP/DWP calculations CM 0017.15.33. 03:
Use a 12-month rolling average to budget monthly income from self-employment.
Business in existence for one year or more
If a business has been in operation for one year or more, average the monthly selfemployment income from the most current income tax report for the 12 months before the
month of application. Use this amount to determine the income to budget for the month of
application and the previous 11 months. Each processing month, determine a new monthly
average to use in the corresponding payment month. Do this by adding the actual selfemployment income and expenses the client reports on DHS-3337-ENG - MFIP Selfemployment Income Worksheet dropping the 1st month from the averaging period, creating a
new 12 month period.
Business in existence for less than 12 months
If a business has been in operation less than 12 months, compute the average for the number
of months the operation has been in business to determine a monthly average. Use this figure
for the number of months the operation has been in business on DHS-3337-ENG - MFIP SelfMNDHS Self-employment Handbook
Updated – 3/12
- 13 -
employment Income Worksheet and add each new month's figures until you have a 12-month
average.
Business income covers partial year
For seasonal self-employment, the caregiver may choose to use the rolling average or actual
income and expenses. Under the actual method, count income in the month received and
expenses in the month incurred.
Business has a major change,
If the business has a major change, compute a new rolling average beginning with the 1st
month of the major change.
Treatment of Draws, Guaranteed payments to partners, Compensation of officers,
Wages/salaries:
Business Owner
Draws/ Guaranteed Payments/
Compensation of officers/ Wages
Sole Proprietorship
SNAP Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
MFIP/DWP Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Partnership
SNAP Count as earned income. Allow as an
SE expense. Enter on STAT/JOBS
MFIP/DWP Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Unit Member
Wages/Salaries
Paid by business
Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Count as earned income. Allow as an
SE expense. Enter on STAT/JOB
Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Business Owner
Draws/ Guaranteed Payments/
Compensation of officers/ Wages
S Corporation
SNAP Count as earned income. Allow as an
SE expense. Enter on STAT/JOBS
MFIP/DWP Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Unit Member
Wages/Salaries
Paid by business
Count as earned income. Allow as an
SE expense. Enter on STAT/JOBS
Do not count, do not allow as an
expense. Enter SE income on
STAT/BUSI.
Self-employment Loss Offset
The income loss from one self-employment business can be used to offset the gain of another
self-employment business. In addition, self-employed farm losses can offset gains from other
income sources, in addition to self-employment businesses. See below for information on how
to handle farm self-employment loss offsets.
MNDHS Self-employment Handbook
Updated – 3/12
14
Farm Loss Offset - CM 0017.15.33.18
When the costs of producing self-employment farm income exceed the gross farm income,
the loss is offset against other countable income.
To qualify for the offset, the person must receive or anticipate receiving annual gross
proceeds of $1,000 or more from the farming enterprise. If there is a farm loss, take the
following steps:
Step 1
Determine the farm loss and apply the loss against the total amount of other net
self-employment income.
Step 2 If the farm loss, is more than the net self-employment income of another selfemployment business, the remainder of the farm loss is offset against the total
other earned and unearned income for that month.
If there is still a net loss, the household is certified based on zero net income. The excess
loss is not carried forward to subsequent months.
If a unit has a monthly net self-employment income gain after a farm loss offset, the
household is entitled to a 20% earned income deduction from the net self-employment
amount.
If a unit has earned income that is not from self-employment, the earned income deduction
from that income is computed based on the amount before a farm loss offset, if any, is
made.
MNDHS Self-employment Handbook
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SE 06.1 SPECIAL SELF-EMPLOYMENT INCOME SITUATIONS
Table of contents
Capital Gains
Capital gains are the proceeds from the sale of capital goods or equipment. A gain or loss is
computed by comparing the sale price to the "cost or other basis." If the sale price is greater,
there is a gain. If the costs are greater, there is a loss.
The "cost or other basis" in general is the cost of the property, purchase commissions,
improvements and sales expenses such as broker's fees and commissions minus
depreciation, amortization and depletion.
The following chart indicates how a capital gain or loss is treated when calculating selfemployment income:
Capital Gain
SNAP
Count as income if the gain is
anticipated to repeat.
Capital Loss
Excluded from income computation.
MFIP
Count as an asset, unless the
business ends, then count as income.
Excluded from asset and income
computation.
Computation of a gain or loss:
 Federal Income Tax Form 1040 Schedule D - Capital Gains and Losses
“Sales price” minus “Cost or other basis” = gain or loss.
 Federal Income Tax Form 4797 Sales of Business Property
“Gross sales price” minus the “Cost or other basis, plus improvements and expense of
sale” = gain or loss. Do not use the Gain or (loss) column on Form 4797 as it includes
depreciation.
Garnishments
Garnishments have no effect on the treatment of self-employment income, as the total gross
amount is counted in the income computation. The amount garnished is not considered as an
exclusion from income.
Bankruptcy
The self-employment income of persons who have declared bankruptcy is computed the
same as the self-employment income of any other person.
After filing bankruptcy:
 If the person continues to earn self-employment income, count the gross amount minus
allowable expenses.
 If the income goes to a trustee, and the trustee pays the bills and gives a living
allowance count the gross amount minus allowable expenses. Do not:
o count the living allowance as income
MNDHS Self-employment Handbook
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o
allow the fees of a trustee or conservator for his services as a business expense
 When the income goes to the self-employed individual, but they must pay a set amount
to a court appointed person for back debts, do not allow the payment for old debts as a
business expense.
 If a business owner sells equipment/property, (title held by owner) and uses the
proceeds to pay off a loan/debts and the proceeds are:
o Received by the owner, count the proceeds as income.
o Diverted to a bank to repay the loan, count the proceeds as income.
 If a business owner voluntarily turns over collateral/ property (bank has title) to a bank,
and the bank sells the collateral/property to pay off a loan/debts, the proceeds of the
sale are not counted as income to the owner.
 If a lender is unable to collect on a loan, the lender may write all or part of it off or
"forgive" the outstanding balance. The forgiven portion is not counted as income to the
household.
Special Payment Types
The following types of payments ARE counted as self-employment income:
 Patronage Dividends paid as cash dividends
 Farm Service Agency (FSA) - Formerly Agricultural Stabilization and Conservation Payments
(ASCS) cash payments (except for disaster payments) are counted as earned selfemployment income. These payments include, but are not limited to, Commodity Credit
Corporation acreage reduction and conservation payments.
 Private Crop Insurance Payments if the insurance company pays the household in
installments.
The following types of payments ARE NOT counted as self-employment income:
 Federal Gasoline Tax Credit
 State Gasoline Tax Refund
 Patronage dividends paid in the form of stock. Count as an asset.
 Federal Crop Insurance Corporation (FCIC). Count as an asset.
 Private Crop Insurance Payment if paid as a nonrecurring lump-sum payment.
 Disaster Assistance Payments. These are also, not counted as an asset.
MNDHS Self-employment Handbook
Updated 3/12
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SE 07.0 SELF-EMPLOYMENT EXPENSES
Table of contents
Self-employment expenses are the costs of operating a self-employment business. Most
expenses that are necessary to the business are allowable deductions from self-employment
income. If you have questions on expenses not listed here, contact PolicyQuest.
Common Business Expenses
Advertising and postage
ALLOWABLE
MFIP/
SNAP
DWP
Yes
Yes
Amortization
No
No
At time of sale, purchase cost of inventory
No
Yes
Attorney and Tax preparation fees
Yes
Yes
Business owner’s share of FICA
No
No
Charitable contributions.
No
No
Clothing specific to the job
Yes
Yes
Credit Card payments
No
No
Depreciation
No
No
Employee FICA
Yes
Yes
Employee benefit programs and
No
No
Employee workers compensation and Unemployment insurance
Yes
Yes
Expenses from a previous period.
No
No
Federal, State and local income taxes
No
No
Fuel and transportation costs
Yes
Yes
Insurance premiums on income-producing property;
Yes
Yes
Internet expense
Yes
Yes
Interest portion of payments on business mortgages and/or
operating loans
Yes
Yes
Interest portion of credit card payments
No
No
Labor Hired paid to non-household member employees.
Yes
Yes
Labor Hired paid to household member employees in a
partnership or corporation.
Yes
No
Labor Hired paid to household member employee in sole
proprietorship.
No
No
Licensing fees, franchise fees, professional fees and dues
Yes
Yes
Livestock, costs relating to livestock, veterinary or breeding fees;
Yes
Yes
Materials
Yes
Yes
MNDHS Self-employment Handbook
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Meals outside of work area
No
Money set aside for business owner’s retirement
Common Business Expenses (con.)
Mortgage on business property
Yes
No
No
ALLOWABLE
MFIP/
SNAP
DWP
Yes
Yes
Net losses from previous periods
No
No
Penalties and fines. (i.e. Late fees, bank charges)
No
No
Pension and profit-sharing plans
No
No
Principle payments on income-producing real estate and capital
assets such as equipment, machinery and other durable goods;
Yes
No
Purchase of Capital assets
Yes
No
Repayment of the principal of a bank loan.
No
No
Repairs and maintenance of equipment that are not capital
expenditures
Yes
Yes
Rental payments on income-producing equipment.
Yes
Yes
Section 179 expenses
No
No
Seed, plants and costs related to crop production
Yes
Yes
Storage and warehousing charges
Yes
Yes
Taxes paid on income-producing property;
Yes
Yes
Tools and supplies that are not capital expenditures
Yes
Yes
Utilities on business property
Yes
Yes
Work-related personal expenses – Meals/entertainment
No
No
Wages paid to non-household member employees.
Yes
Yes
Wages paid to household member employees in a partnership or
corporation.
Yes
No
Wages paid to household member employee in sole
proprietorship.
No
No
MNDHS Self-employment Handbook
Updated 3/12
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SE 07.1 SELF-EMPLOYMENT TRANSPORTATION EXPENSES
Table of contents
Determine allowable transportation expense amounts by using the:
 Tax forms, amount allowable unless questionable.
 Itemized list of expenses. Verification needed, use ledgers/books, or DHS-3336-ENG - Selfemployment Report Form.
 Flat Rate Deduction – use current IRS rate. Verification needed - odometer readings,
dates, travel destination and the purpose of each trip.
For itemized list and flat rate, determine if a transportation expense is allowable by using the
chart on the following page.
MNDHS Self-employment Handbook
Updated 3/12
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Self-employment Transportation Costs
Allowable or Not Allowable Chart
KEY
Never Allowable
Home
Office
Work site
Allowable
Never
allowable on
a day off from
regular or main job.
SE - Self-employment
Client/customer
SE has a principal place of business outside of the home.
Self-employment
jobs
Allowable
Home office
SE principle place of business is in the home.
Not
Allowable
Not
Allowable
Always
Allowable
Allowable
Allowable
Always
Allowable
SE work within 35
miles of home.
SE work beyond 35
miles of home.
MNDHS Self-employment Handbook
SE has no principle
place
Updated
3/12 of business
- 21 -
MNDHS Self-employment Handbook
Updated 3/12
- 21 -
SE 07.2 SELF-EMPLOYMENT SNAP BUSINESS EXPENSE OR SHELTER DEDUCTION
Table of contents
SE HWS 1 Business Use of Home Worksheet
No portion of a shelter expense may be claimed as both a shelter cost/utility and a selfemployment business expense. Document the client’s choice.
The following procedures apply to self-employment situations (including farming) where part of
the residence or house is set aside and used in the business.
For the landlord's household, if a room or a separate apartment in the house in which the client
lives, is rented out, treat housing costs (excluding utilities), in one of the following ways: (Note:
This section does not apply to separate households that share the costs of one apartment.)
On a case-by-case basis:
1. Include all costs (such as rent, mortgage, taxes, and insurance) which the landlord is
required to pay as household shelter costs: OR
2. Allow part of the costs as self-employment costs and part as shelter costs, provided that
no costs are allowed as both self-employment costs and shelter costs. If separately
identified, only the portion attributed to the landlord's living space can be included in his
shelter costs. No portion of the principal attributed to the self-employment enterprise
under this option is allowed.
Utility Expenses and the Standard Utility Allowance (SUA)
HOME BUSINESS SITUATIONS
Situation 1. Part of the residence, such as a room, is used for a self-employment enterprise,
other than rental - allow the household the standard utility allowance (SUA) but no selfemployment business deduction.
Situation 2. A person uses part of the house in which he or she lives for a self-employment
enterprise, other than rental, and the portion used is equivalent to a separate residence.
a. If there is a central meter, allow the SUA, but no self-employment business deduction.
b. If utilities are measured and billed separately, the household is entitled to the SUA for
the household utility costs and a SE deduction for the separately billed self-employment
costs as a cost of doing business.
LANDLORD SITUATIONS
Situation 1. A landlord has individually metered heating costs for his residence. The landlord is
billed for and pays the utility provider. They rents out a room in their residence. A flat amount is
charged for rent which includes utilities.
MNDHS Self-employment Handbook
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

For the landlord's household - allow the SUA.
For the renter’s household - if the landlord indicates a portion of the rent is applied to
utilities, allow the appropriate SUA.
Situation 2. A landlord has individually metered heating costs for his residence. The landlord is
billed for them and pays the utility provider. They rent out a room in their residence and charge
extra for utilities. When a landlord charges the renter for utilities separately from rent, either
actual, a percentage, or a flat amount, allow both the renter and the landlord the SUA as
shelter costs.
For example, a household may rent out a room and charge a flat amount for rent plus 1/3 of
the actual utility expenses each month. In this case, both the roomer and the landlord are
allowed the SUA.
The renter's utility payment to the landlord is counted as income to the landlord, and the
landlord is entitled to a self-employment deduction in this amount for the costs of providing
utilities to the renter.
Situation 3. A household rents out a separate apartment in the house in which he or she lives.
There is a central meter, and the landlord is billed for the utilities.


For the landlord's household - allow the SUA.
For the renter’s household - allow the SUA.
Situation 4. A landlord rents out a separate apartment in the house in which he or she lives.
There are separate utility meters and separate bills. Both households pay the utility provider
directly.


For the landlord's household - allow the SUA.
For the renter’s household - allowed the SUA.
The renter's utility payment is not counted as income to the landlord and no deduction is
allowed as a self-employment cost.
FARMING SITUATIONS
Situation 1. A farmer's home is on property connected to property used for farming. The
shelter costs and self-employment costs can be separately identified. Utility costs for a barn
are metered separately from the home.
The household is entitled to the SUA for its residence and to the separately billed selfemployment costs as a cost of doing business.
MNDHS Self-employment Handbook
Updated 3/12
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Situation 2. A farmer's home is on property connected to property used for farming. The
shelter costs and self-employment costs can not be separately identified.
The unit has the choice of either allowing the SUA or a SE business expense but not both.
Document in CASE/NOTE the unit's choice.
Situation 3. The farmer uses part of his house, such as a separate room or a separate
apartment solely for the farm enterprise and there is a central meter - allow the SUA.
MNDHS Self-employment Handbook
Updated 3/12
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SE 08.0 SELF-EMPLOYMENT REPORTING AND ACTING ON CHANGES
Table of contents
Units may report any change at any time.
Six-month Reporting (SR)
SNAP units with self-employment income who are not MFIP/Uncle Harry SNAP or change
reporters must report under six-month reporting requirements.
Six month reporting requirements include reporting all income and circumstances relevant to
the amount of the SNAP allotment and changes that could affect eligibility and/or benefit
amount on a six month basis. Additionally, it requires the reporting of two changes the month
by the 10th calendar day following the month the change occurred.
 When the gross income of the household is over the income limit (130% of poverty level)
for their household size, and
 When Able Bodied Adult Without Dependents (ABAWD) work or employment and training
activities fall below 20 hours per week.
Monthly Reporting (MR)
MFIP and Uncle Harry SNAP households are required to submit monthly reports. Monthly
reporting households are required to report budget month income and other circumstances
relevant to the amount of the allotment and anticipated changes that could affect eligibility.
This includes self-employment income and allowable expenses. MFIP will continue to use the
rolling average. Uncle Harry SNAP income will be based on an average, so substantial
changes will need to be taken into account.
Change Reporting (CR)
SNAP self-employed units who are homeless, in the migrant work stream, seasonal farm
workers or live on an Indian reservation are considered change reporters and must report
changes according to change reporting requirements. In regard to income changes, they must
report a change in the source of income or in the amount of total gross monthly income of
more than $100 by the 10th calendar day following the month the change occurred.
Changes Reported or Known to the Agency:
The agency must take prompt action on all changes reported to determine if the change affects
the unit’s eligibility or benefit level.
 The county agency must act on ALL changes resulting in a decrease or ineligibility,
allowing for proper notice.
 The county agency must act on ALL changes resulting in an increase in benefits no
later than 10 days from the date the change was reported. The increase in benefits
must be effective no later than the month following the month the change was reported.
For SNAP the following items will be considered as “known to the agency” and may or may not
require follow up:
• Information received by the agency from the client or their authorized representative.
• Information from other sources. Such as: IEVS matches, MEC2 integrated information,
MAXIS/PRISM interface, Social Services, New Hire reports, DAIL messages.
When any change is reported or becomes known to the agency, workers must act on
the change.
MNDHS Self-employment Handbook
Updated 3/12
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SE 09.0 MAXIS SELF-EMPLOYMENT DEFINITIONS
Table of contents
MAXIS divides self-employment income into nine types, identifying each type by a 01 - 09 code. This section defines each of these types and
provides information regarding the certification process. The nine MAXIS self-employment types are:
01
02
03
04
05
06
07
08
09
HOME
REAL
OTHER
PERSONAL
PAPER
IN-HOME
FARMING
PRODUCT
RENTAL
OTHER
ESTATE
SALES
SERVICES
ROUTE
DAYCARE
SALES
The activity of
The
Also called
The activity Also called service
Also called
The activity of
The activity Any
growing/raising activities of
Direct Sales
of selling
industry.
Newspaper providing day- of leasing or activity
farm items for
buying,
Industry.
products or
The activities that
delivery.
care for other
renting
that does
the purpose of selling
The activity of
goods other provide services
The activity people's
personal or
not fall
producing
and/or
selling
than real
rather than goods to
of delivering children in the
real
into one of
income. The
managemen merchandise
estate and
the customer. The
newsindividual’s
property to
the other
self-employed
t or develop- on-line, door-to- items
service may offer an
papers to
own home.
another
eight
individual must ment of real door, parties,
defined as
improved standard of people's
person for
codes.
have direct
property.
from trucks/
home
living or convenience, homes.
payment.
involvement in
wagons or from product
professional or
the farming
temporary
sales items. technical expertise,
activity.
locations.
or other essential
services.
Beef Cattle
Dairy
Fruit
Grain
Hobby
Organic
Sod
Tree
Vegetable
Real Estate
Agent
Real Estate
Broker
Real Estate
Manager
Amway Corp
Avon Products
Creative
Memories
Discovery Toys,
Fuller Brush
Home Interiors
The Kirby Co
Lia Sophia
Longaberger
Mary Kay
Pampered Chef
Princess House,
Shaklee Corp
Tastefully Simple,
Tupperware
Watkins
Weekenders
Logging
Gas Station
Traveling
Sales person
Grocery/
General store
Clothing
store
Hardware
store
Convenience
store
Restaurant
Acupuncture
Artist
Catering
Carpenter
Construction
Dog Grooming
Hair Care
Housekeeping
Plummer
Home Repair
Interpreter
Janitorial
Lawn Care
Massage
Musician
Odd jobs
Therapy
Tax Accountant
Taxi Driver
Truck Driver
MNDHS Self-employment Handbook
Updated 3/12
Paper or
Newspaper
Carrier
Daycare
Provider
Apartment
House
Farmland
Hunting Land
Business
Space
Equipment
Vehicles
- 25 -
SE 09.01 FARMING
MAXIS Self-Employment Income Type 01
CM 0017.15.33.24
SE HWS 1 Farming Worksheet
MNDHS Self-employment Handbook
Updated 3/12
- 26 -
Table of contents
SE HWS 1 Farming Worksheet
Farming is the self-employment business of operating a farm. It is the cultivating of a place
where items are raised, such as the earth or a tract of water, to obtain things it can produce;
such as grain, fruit's, fish and other things
Farming income includes the proceeds from the farming operation plus the gains from the sale
of capital goods and/or equipment (capital gains). See Handbook Section 06.1 Special Income
Computation Situations for more information on computing capital gains.
Farm income is earned income and is entered on MAXIS BUSI
See Handbook Section 06.0 Computing Self-employment Income and Expenses or Handbook
Section 09.01.5 Farm Loss Offset, for information on how to apply a farm loss offset to other
household income.
As in any other business reported changes that affect the nature or scale of the farming
business such as a change in the type of farm operation, the amount of land farmed, drought
or crop failure, a substantial change in market prices, etc. which would affect the net income
must be taken into account and adjustments. [CM 0017.15.33.03, 0017.15.33.24]
Common Minnesota Farm Income Situations:
Grain
Dairy
Vegetable
Beef
Poultry
Common Farming Expenses:
Breeding fees
Chemicals
Feed
Fertilizer
Fuel
Interest
Insurance
Repairs
Seed
Supplies
Veterinary
Verification Sources
Tax forms, farm ledgers, or business records.
Questions you may want to ask:
What is the business situation?
Do you file taxes on this income?
Do the most recent tax forms reflect your current farm operation?
Do you anticipate all income and expenses to continue in the next year?
Did you file a Schedule D Capital Gains and Losses or Form 4797 Sales of Business Property
for this tax year?
If Schedule F indicates “Other expenses”, ask for clarification of what those expenses are.
What are your expenses?
MNDHS Self-employment Handbook
Updated 3/12
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SE 09.01.1
Table of contents
FARM LOSS OFFSET
When the costs of producing self-employment farm income exceed the gross farm income, the
loss is offset against other countable income.
To qualify for the offset, the person must receive or anticipate receiving annual gross proceeds
of $1,000 or more from the farming enterprise. If there is a farm loss, the offset is made in two
steps as follows:
Step 1. Determine the monthly farm loss and apply the monthly loss against the total amount
of other net self-employment income computed for that month.
Step 2. If the farm loss, is more than the net self-employment income of another business,
the remainder of the farm loss is offset against the total other earned and unearned
income for that month.
If there is still a net loss, the household is certified based on zero net income. The
monthly excess loss is not carried forward to subsequent months.
If a household has a monthly net self-employment income gain after a farm loss offset, the
household is entitled to a 20% earned income deduction from the net self-employment amount.
If a household has earned income that is not from self-employment, the earned income
deduction from that income is computed based on the amount before a farm loss offset, if any,
is made.
MNDHS Self-employment Handbook
Updated 3/12
- 28 -
SE 09.02 REAL ESTATE
The MAXIS Self-employment Income Type 02
CM 0017.15.33
SE HWS 3 Sales / Services Worksheet
MNDHS Self-employment Handbook
Updated 3/12
- 29 -
Table of contents
SE HWS 3 Sales / Services Worksheet
A Real Estate business could cover two business areas: Real Estate Sales and/or Real Estate
Management.
This would include the activities concerned with the buying or selling and the management or
development of commercial or residential real property – immovable land, including all the
natural resources and permanent buildings on it.
Real estate income is earned income and is entered on MAXIS BUSI.
Real Estate Sales
Real Estate Sales are the activities involved in buying or selling or real estate.
Real Estate Agent - A licensed salesperson working for a real estate broker. In the U.S., all
real estate agents have to be licensed by the state where they work. Real estate agents
generally work in offices. Some agents work out of their own homes. Much of their time is
spent outside the office showing houses to buyers.
Real Estate Broker – A broker is a person licensed to arrange the buying and selling of real
estate for a fee. Real estate brokers manage real estate offices.
Commission - A fee charged by a broker or agent for his/her service in facilitating a
transaction, such as the buying or selling of real estate or securities.
Typical activities include:
 Meeting and dealing with prospective sellers and buyers
 Evaluation and recommendation for pricing
 Advertising
 Showing
 Working with banks and lending institutions
 Complete and file paperwork
Real Estate Management - Also called Property Management or Real Estate Development
Real Estate Management or property management is the operation of commercial and/or
residential real estate.
Property Managers - A property manager is a person or firm charged with operating a real
estate property for a fee. The property manager has a primary responsibility to the landlord
and a secondary responsibility to the tenant.
MNDHS Self-employment Handbook
Updated 3/12
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Typical activities include:
 finding/evicting and dealing with tenants,
 improvement/repair,
 cleaning,
 indoor and outdoor maintenance and
upkeep



collect rents,
pay necessary expenses and taxes,
make periodic reports to the owner.
Income
Typically, real estate agents do not get a regular paycheck. If the agent sells a house
successfully, then he/she receives a portion of the sale price as a commission.
A property manager on the other hand, will often receive regular pay.
Common Expenses (Not inclusive)
Advertising
Office supplies
Real Estate License
Transportation
Verification Sources
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule C
Partnership – IRS 10 40 and IRS 1065 and 1065 K1
S Corporations – IRS 1040 and IRS 1160 and 1160K1
Questions you may want to ask:
Do you have an office or job site?
Do you file taxes on your SE?
Do the most recent tax forms reflect your current business operation?
Do you anticipate all income and expenses to continue in the next year?
Does your SE include travel?
How are you paid – salary, commission?
What are your expenses?
MNDHS Self-employment Handbook
Updated 3/12
- 31 -
SE 09.03 HOME PRODUCT SALES
MAXIS Self-employment Income Type 03
CM 0017.15.33
SE HWS 3 Sales / Services Worksheet
MNDHS Self-employment Handbook
Updated 3/12
- 32 -
Table of contents
SE HWS 3 Sales / Services Worksheet
Also called Direct Selling Industry
Home product sales include businesses that sell merchandise door-to-door, from vehicles or
from other temporary locations.
Home product sales income is earned income and is entered on MAXIS BUSI.
Home Product Distributor – (Also called representatives, consultants.) Includes individuals who
sell products by the direct selling methods and are not employees of the sales company.
Income may be earned at two levels:
 The person may become a product distributor and makes a commission on the sales
made by other distributors he or she signs up.
 The Direct Selling Distributor displays and sells the product using the party plan, where
the seller invites friends to a party where goods are displayed and sold, or through
networking. The internet is becoming a viable source for direct sale.
Home Product Sales List (not inclusive):
Amway Corporation
Home Interiors & Gifts, Inc.
Avon Products, Inc.
The Kirby Company
Creative Memories
Lia Sophia
Discovery Toys, Inc
The Longaberger Company
The Fuller Brush
Mary Kay Inc.
Company
Norwex
Herbalife International of
The Pampered Chef
America, Inc.
Princess House, Inc.
Shaklee Corporation
Tastefully Simple, Inc.
Tupperware
Watkins
Weekenders USA, Inc.
Income
Distributors most likely report sales and expenses on a regular basis, and are paid based on
amount of sales. Be aware of possible awards and bonus opportunities.
Common Expenses
Advertising
Office supplies
Postage
Product Samples
Transportation
Verification Sources
Self-employment report form
Client’s ledger/books
Sales Statements
Tax Forms –
Sole Proprietor – IRS 1040 and
Schedule C
Questions you may want to ask:
Do you have an office or job site?
Do you file taxes on your SE?
Does your SE include travel?
How are you paid – salary, commission?
What are your expenses?
MNDHS Self-employment Handbook
Updated 3/12
- 33 -
SE 09.04 OTHER SALES
MAXIS Self-Employment Income Type 04
CM 0017.15.33
SE HWS 3 Sales / Services Worksheet
MNDHS Self-employment Handbook
Updated 3/12
- 34 -
Table of contents
SE HWS 3 Sales / Services Worksheet
Other Sales is a self-employment business which includes the sale of goods other than real
estate and direct sales. Common “other” sales would be:
Logging
Gas Station owner
Traveling Sales person
Grocery/general store owner
Clothing storeowner
Hardware store owner
Convenience store
Restaurant owner
Other sales income is earned income and is entered on MAXIS BUSI.
Income
Income may be received on commission, as a draw or from business profits. Persons receiving
a salary would most often be an employee of the business and not self-employed. See SE
06.0 Calculating Self-employment Income and expenses for information on how to treat
“draws”.
Common Expenses (Not inclusive)
Cost of goods
Maintenance/Repair
Mortgage/Rent
Supplies
Taxes/ Insurance
Transportation
Wages
Verification Sources
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule C
Partnership – IRS 10 40 and IRS 1065 and 1065 K1
S Corporations – IRS 1040 and IRS 1160 and 1160K1
Questions you may want to ask:
Do you have an office or job site?
Do you file taxes on your SE?
Are most recent taxes reflective of current business operation?
Do you anticipate all income and expenses to continue?
Does your SE include travel?
What good or product do you sell?
How are you paid – salary, commission?
What are your expenses?
MNDHS Self-employment Handbook
Updated 3/12
- 35 -
SE 09.05 PERSONAL SERVICES
MAXIS Self-Employment Income Type 05
CM 0017.15.33
SE HWS 3 Sales / Services Worksheet
MNDHS Self-employment Handbook
Updated 3/12
- 36 -
Table of contents
SE HWS 3 Sales / Services Worksheet
Personal Service self-employment jobs include activities from cutting the grass to providing
health care to delivering packages. Service industries play an integral part in the daily activities
of people and businesses. These services may offer convenience, an improved standard of
living, professional and technical expertise, or other essential services. The providers of such
services involve all sectors of the economy including for-profit private businesses, non-profit
organizations and various levels of government.
Generally, these services involve the performance of actions on behalf of the customer and
have little, if any, tangible substance. In some instances, however, the services provided may
involve the receipt of a tangible product by the customer.
Personal services income is earned income and is entered on MAXIS BUSI.
Income
Income from personal service self-employment is typically received on a regular basis. Be
aware of possible tip and bonus opportunities.
Common Expenses
Advertising
Business Supplies
Licenses
Office supplies
Permits/fees
Tools
Transportation
Verification Source
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule C
Partnership – IRS 10 40 and IRS 1065 and 1065 K1
S Corporations – IRS 1040 and IRS 1160 and 1160K1
Questions you may want to ask:
Do you have an office or job site?
Do you own or lease your equipment?
Do you file taxes on your SE?
Are the most recent taxes reflective of your current business operation?
Do you anticipate all income and expenses to continue?
Does your SE include travel?
How are you paid?
Do you receive tips?
What are your expenses?
MNDHS Self-employment Handbook
Updated 3/12
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SE 09.05.1
PERSONAL SERVICES – TAXI DRIVERS
Table of contents
Taxi drivers may be self-employed or employed and earn a salary. Drivers usually report to a
Taxi company where they are assigned a vehicle.
Lease Drivers
Under a lease arrangement, a driver pays the taxi owner a flat amount for each shift or week.
Owners are guaranteed the lease fee for each shift the cab is leased, regardless of how much
time the driver actually works or how much money the driver takes in. Drivers earnings are the
difference between their total revenues (fares and tips) and the expenses (lease fees and
gasoline).
Owner drivers
Some drivers own their taxis. These drivers would have expenses that lease drivers do not,
such as car expenses and additional permits. They may also pay a fee to use a company’s
dispatch system.
Income
At the end of each trip, drivers collect the fare and generally a tip. Information regarding the
trip, including the place and time of pickup and drop-off and fare are entered into the trip sheet.
Most often taxi drivers are required to keep a daily trip sheet.
Earnings of taxi drivers vary greatly, depending on factors such as the number of hours
worked, customers’ tips and geographic location.
Common Expenses
Gas
Leases
Vehicle Maintenance/Repair
Verification Sources
Self-employment report form
Client’s ledger/books/trip logs
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule C
Partnership – IRS 10 40 and IRS 1065 and 1065 K1
S Corporations – IRS 1040 and IRS 1160 and 1160K1
Questions you may want to ask:
Do you have an office or job site?
Do you own or lease your equipment?
Do you file taxes on your SE?
Are your most recent taxes reflective of your current business operation?
Do you anticipate all income and expenses to continue?
How are you paid?
Do you receive tips?
What are your expenses?
MNDHS Self-employment Handbook
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SE 09.06 PAPER ROUTE
MAXIS Self-employment Income Type 06
CM 0017.15.33
SE HWS 3 Sales / Services Worksheet
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Table of contents
SE HWS 3 Sales / Services Worksheet
Also called Newspaper Delivery, Paper or newspaper carrier.
A paper route or newspaper delivery job is the delivering of newspapers to people's homes. Delivery
carriers are typically independent contractors that pick up their papers from our distribution
centers and then deliver them on a set route to individual homes. The carrier is probably not
responsible for collections.
Paper route income is earned income and is entered on MAXIS BUSI.
Income
Pay varies depending on the length and number of papers on the route. Carriers may be
eligible for tips or bonuses.
Common Expenses
Transportation (if the route is a driving route).
Gloves
Shoes
Warm clothing/boots
Supplies
Verification Sources
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule C
Questions you may want to ask:
Driving or walking route?
Where do you pick up the papers?
What is included on your pay stub?
Are you paid bonuses or tips?
Do you file taxes?
Are most recent taxes reflective of your current business operation?
Do you anticipate all income and expenses to continue?
What expenses do you have?
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SE 09.07 IN-HOME DAYCARE
MAXIS Self-Employment Income Type 07
CM 0017.33.15.21
SE HWS 4 In-Home Day Care Worksheet
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Table of contents
SE HWS 4 In-Home Day Care Worksheet
"In-home daycare" income is income received for providing care for other people’s children by
a caregiver in their own home. Some, but not all in-home daycare providers are licensed.
Income
In-home daycare income is earned income and is entered on MAXIS BUSI.
Daycare Income
MN Child and Adult Care Food
Program
Expenses
Daycare Income
SNAP
Use gross amount.
Use gross amount minus
reimbursement amount for
providers own children.
MFIP/DWP
Use gross amount.
Do not use in income
determination.
Daycare Expenses
Itemize or Flat Rate
SNAP
Must itemize and verify. For food expense, may
use actual or the reimbursement figures used
by the Child and Adult Care Food Program.
MFIP/DWP
May itemize and verify, or use the flat
rate of 60% of the gross receipts.
Common In-Home Day Care expenses:
Food
Toys
Supplies
License/professional fees
Advertising
Transportation
Use the In-Home Business ratio for daycare expenses related to home shelter costs such as:
mortgage/rent, taxes/insurance, and utilities. The areas used for in-home child care are
considered exclusive business use if the client's home is licensed for child care or is exempt
from licensing. Using the Business Use of Home Worksheet, base the business ratio on
square footage and the proportion of time the unit uses the area for child care. Determine
what is most beneficial to the unit - business expense or shelter standard, document decision.
Verification Sources
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and
Schedule C
Questions you may want to ask:
Are you a licensed provider?
Do you file taxes on your SE?
Are the most recent taxes reflective of the
current business operation?
Do you expect all income and expenses to
continue?
How are you paid?
What are your expenses?
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SE 09.08 RENTAL
MAXIS Self-Employment Income Type 08
CM 0017.15.33.30
SE HWS 5 Rental Worksheet
SE HWS 6 Roomer / Boarder Worksheet
Table of contents
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SE HWS 5 Rental Worksheet
(See section 09.08.01 for Roomer Boarder)
Rental income is income received based on a rental, tenancy, or lease agreement. These
agreements are formal and/or informal contracts between an identified landlord and
renter/tenant/lessor, giving rights to both parties, e.g. The renter has the right to occupy the
accommodation for an agreed term and the landlord’s right is to receive the agreed upon rent
amount.
Income
Rental income may be earned or unearned, enter both on MAXIS BUSI. MAXIS determines
earned or unearned based on number of hours entered in Reported Hrs field. Earned rental
income is allowed the earned income deduction, unearned is not.
Common Rental Income Situations:
House
Duplex
Apartment
Land
Business Property
Storage
Rental Income
Earned or Unearned
MFIP/DWP
Use a rolling average to determine number
of hours worked per month. 43 per month
indicates earned income
Expenses
Common Rental Business expenses:
Advertising
Mortgage (SNAP Only)
Interest
Taxes/Insurance
Postage
SNAP
Use client reported number of hours worked
per month. An average of 20 hours per
week indicates earned income.
Registration & Inspection Fee
Repair
Supplies
Upkeep
Utilities
Business Expense Deductions
Actual or Flat Rate
MFIP/DWP
Use actual. OR
Use 2% of property estimated market value for
Upkeep and Repairs and actual for the other
expenses.
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SNAP
Use actual.
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Separate Living Quarters - Rental Utility Costs
Business Expense Deduction or Shelter Deduction
MFIP
DWP
SNAP
Utilities billed Prorate the actual utility Prorate the actual utility Allow the SUA.
to Client
costs using the
costs using the
(landlord)
business to home ratio. business to home ratio.
Use the amount
Allow the business
attributed to the
expense portion as a
business as a business business deduction and
expense. Shelter
the home portion as a
deduction is NA
shelter utility deduction.
Utilities
Billed to
Renter
NA
Allow actual utility costs
with flat rate of $35 for
phone.
Allow SUA.
Verification Sources
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule E
Partnership – IRS 10 40 and IRS 1065 and 1065 K1
S Corporations – IRS 1040 and IRS 1160 and 1160K1
Questions you may want to ask:
Do you have an office or job site?
Do you file taxes on your SE?
Are the most recent taxes reflective of the current business operation?
Do you anticipate all income and expenses to continue?
Does your SE include travel?
How are you paid?
What are your expenses?
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SE 09.08.1 ROOMER/BOARDER RENTAL INCOME
See section 09.08. for Rental Self-employment.
Table of contents
SE HWS 6 Roomer / Boarder Worksheet
A roomer is someone who rents a room in someone else’s home.
A boarder is someone who pays for food and bed: somebody who pays to sleep and eat in a
private home or boarding house.
Income
Roomer/boarder income is earned self-employment income and is enter on MAXIS RBIC.
Expenses
Common Roomer/Boarder Business expenses:
Food
Mortgage SNAP Only)
Interest
Taxes/Insurance
Repair
Supplies
Upkeep
Utilities
The business property ratio is: rented number of rooms/square footage divided by the total
number of rooms/square footage in the building. The allowable business expense portion is
the expense multiplied the business property ratio.
Roomer
Boarder(s)
Roomer(s)/
Boarder(s)
Business Expense Deductions
Actual or Flat Rate
MFIP/DWP
SNAP
Flat rate of $71.
Actual expenses, using business property
ratio.
Thrifty Food Plan amount
Actual food expense or the Thrifty food plan
based on number of
amount based on number of boarders.
boarders.
Thrifty Food Plan amount
Actual food expense or the Thrifty food plan
based on number of
amount based on number of boarders plus
boarders plus roomer rate.
other actual expenses, using business
property ratio.
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Utilities
billed to
Client
(landlord)
Utilities
Billed to
Renter
Roomer Boarder Rental Utility Costs
Business Expense Deduction or Shelter Deduction
MFIP
DWP
SNAP
Prorate the actual
Prorate the actual utility Allow SUA.
utility costs using the
costs using the
business to home ratio. business to home ratio.
Use the amount
Allow the business
attributed to the
expense portion as a
business as a business business deduction and
expense. Shelter
the home portion as a
deduction is NA
shelter utility deduction.
NA
Allow actual utility costs
with flat rate of $35 for
phone.
Allow SUA.
Verification Sources
Self-employment report form
Client’s ledger/books
Tax Forms –
Sole Proprietor – IRS 1040 and Schedule C or E
Questions you may want to ask:
Is this a roomer only? Boarder only?
If a boarder only or room/board situation, how many meals are provided per day?
Do you file taxes on this income?
Are the most recent taxes reflective of the current business operation?
Do you anticipate that all income and expenses will continue?
How are you paid?
What are your expenses?
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SE 09.09 OTHER
MAXIS Self-Employment Income Type 09
CM 0017.15.33
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Table of contents
If the client's self-employment business does not fit into one of the previous eight codes, code as
income type 09 – Other. Use the CM and earlier sections of this hand book to determine how the
income and expenses are to be handled.
Contact PolicyQuest with any questions.
There is no worksheet for Other - use any worksheet that best meets the needs of the business.
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SE 10.00
SELF-EMPLOYMENT RELATED TERMS and DEFINITIONS
Table of contents
AGENCY:
The agency is defined as DHS and the county human service agency(s) in Minnesota and
includes any agency(s) that contracts with the human service agency for delivery of financial,
health care, child care programs, and employment services.
AMORTIZATION:
(IRS definition from 4562 Form Instructions) Amortization is similar to the straight line method of
depreciation in that an annual deduction is allowed to recover certain costs over a fixed time
period. You can amortize such items as the costs of starting a business, goodwill, and certain
other intangibles.
ANNUALIZATION:
Annualization is making calculations for a period of less than a year as if the period were a
whole year. For example, if figures existed for only one quarter, it could be annualized by
multiplying by four.
AVERAGE:
The amount arrived at by adding a group of numbers, and dividing the total by the number in the
group. For example, add four figures together, and then divide the total by four.
BANKRUPTCY:
Bankruptcy is a legally declared inability of an individual, business or organization to pay their
creditors. In the majority of cases, the debtor initiates the bankruptcy legal proceedings. There
are different types of bankruptcies. Some allow continuation of the same kind of business and
others do not.
BUSINESS EXPENSE:
Operating costs of a firm which must be both (1) ordinary, common and accepted in the trade,
and (2) necessary, appropriate and useful in operating the business.
BUSINESS NATURE and SCOPE:
Nature - The essential characteristics and qualities of a business. Scope – The sum of all the
parts and pieces that makes up a business. Changes to the nature and scope of a business are
not included in the averaged income and expenses. These types of changes mean the averaged
income will need to be adjusted. See Normal Business Fluctuation.
CAPITAL ASSET:
An asset with a useful life of more than 1 year. (CM)
A long-term asset, such as land or a building. (The American Heritage College Dictionary, 3rd
edition)
EXAMPLES of capitals assets that may have more than one year of use before it is traded or
sold:
 Painter - spray painting equipment
 Contractor - forklift, bulldozer, large trucks, etc.
 Farmers - tractors, livestock (dairy herds), land, etc
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CAPITAL EXPENDITURE:
The purchase or improvement of real property or personal property having a useful life of more
than 1 year. (CM)
CAPITAL GAIN:
Profit received from the sale of a capital asset. (CM) Countable under any self- employment
business, but most often seen with farming. See farming section for more information on capital
gains.
CHARTER:
A document outlining the principles, functions, and organization of a corporate body; a
constitution. (The American Heritage College Dictionary, 3rd edition.)
COMMISSION:
A fee charged by a broker or agent for his/her service in facilitating a transaction, such as the
buying or selling of real estate or securities.
COMPENSATION TO OFFICER:
To receive money regularly from a S Corporation self-employment business. May also be
called a draw, guaranteed payment to partner or wages/salary.
CONTRACTOR:
A contractor is a person or company with a formal contract to do a specific job, supplying labor
and materials and providing and overseeing staff if needed.
General/Prime Contractor - A general contractor is a group or individual that contracts with
another organization or individual (the owner) for the construction or renovation of a building,
road or other structure. A general contractor is defined as such if it is the signatory as the
builder of the prime construction contract for the project. A general contractor usually is
responsible for the supplying of all material, labor, equipment, (engineering vehicles and
tools) and services necessary for the construction of the project.
Independent Contractor- An independent contractor is a self-employed person who provides
certain services to a client or owner, (or a third-party) on behalf of the client. An independent
contractor is not under the control, guidance, or influence of the client and, unlike an
employee, does not owe a fiduciary duty. The client neither deducts the payroll or withholding
taxes from payments to the independent contractor, nor contributes the employer's share. To
be legally designated as an independent contractor, an individual must (1) be free from the
control of the client, (2) be able to exercise his or her judgment as to the manner and
methods to accomplish the end-result, and (3) be responsible for the end-result only under
the terms of the contract.
Subcontractor - An individual or company hired by a general or prime contractor to perform a
specific task as part of the overall project.
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CORPORATION:
A body that is granted a charter legally recognizing it as a separate legal entity having its own
rights and privileges, and liabilities distinct from those of its members. (The American Heritage
College Dictionary, 3rd edition.)
S-CORPORATION: An S-Corporation begins its existence as a general, for Profit Corporation
upon filing the Articles of Incorporation at the state level. A general for-profit corporation (also
known as a C-Corporation) is required to pay income tax on taxable income generated by the
corporation.
After the corporation has been formed, it may elect “S-Corporation Status” by submitting IRS
form 2553 to the Internal Revenue Service (in some cases a state filing is required as well).
Once this filing is complete, the corporation is taxed like a partnership or sole proprietorship
rather than as a separate entity. Thus, the income is “passed-through” to the shareholders for
purposes of computing tax liability. Therefore, a shareholder’s individual tax return will report
the income or loss generated by an S-Corporation. An S-Corporation can have a maximum
of 75 shareholders, and the income and expenses would still be passed through to each
individual and taxed on that level.
S-Corporations are considered self-employment businesses.
C-CORPORATION: An artificial ‘legal being’ (legal concept only) endowed by law with the
powers, rights, liabilities and duties of a natural person. A corporation’s assets are controlled
by the business entity itself, not by the owners (stockholders) directly.
C-Corporations are not considered self-employment businesses. Persons are considered
employed by a corporation and you would count their wages accordingly.
DCP:
The Direct and Counter-Cyclical Payment Program (DCP) provides payments to eligible
producers on farms enrolled for the 2008 - 2012 crop years. There are two types of DCP
payments - direct payments and counter-cyclical payments. Both are computed using the base
acres and payment yields established for the farm. DCP was authorized by the Farm Security
and Rural Investments Act of 2002 (2002 Farm Bill) and is administered by the U.S. Department
of Agriculture's Farm Service Agency (FSA).
DEPRECIATION:
(IRS definition from 4562 Form Instructions) Depreciation is the annual deduction that allows you
to recover the cost or other or other basis of your business or investment property over a certain
number of years. Depreciation starts when you first use the property in your business or for the
production of income. It ends when you either take the property out of service or deduct all your
depreciable cost or basis, or no longer use the property in your business or for the production of
income.
DIVIDEND:
The amount of the profit distribution a shareholder receives, or the amount of the
surplus distribution a policyholder of a participating insurance policy receives.
DRAW:
To receive money regularly from the self-employment business. May also be called
guaranteed payment to partner, compensation to officer or wages/salary.
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FARMING: MAXIS SE Income Type 01:
The activity of growing/raising farm items for the purpose of producing income. The selfemployed individual must have direct involvement in the farming activity.
FARM LOSS OFFSET:
The amount a SNAP client’s countable income is reduced because of a net loss in farm income.
See §0017.15.33.18 (Self-Employment Loss Offset).
FARM SERVICE AGENCY (FSA):
Formerly Agricultural Stabilization and Conservation Payments (ASCS)
FEDERAL CROP INSURANCE CORPORATION (FCIC):
The Federal Crop Insurance Corporation (FCIC) promotes the economic stability of agriculture
through a sound system of crop insurance and providing the means for the research and
experience helpful in devising and establishing such insurance.
GUARANTEED PAYMENT TO PARTNER:
To receive money regularly from a partnership self-employment business. May also be
called draw, compensation to officer or wages/salary.
GENERAL/PRIME CONTRACTOR:
A general contractor is a group or individual that contracts with another organization or individual
(the owner) for the construction or renovation of a building, road or other structure. A general
contractor is defined as such if it is the signatory as the builder of the prime construction contract
for the project. A general contractor usually is responsible for the supplying of all material, labor,
equipment, (engineering vehicles and tools) and services necessary for the construction of the
project.
HOME OFFICE – PRINCIPLE PLACE OF BUSINESS:
When the home office is the principle place of business, it must be an area of exclusive AND
regular use. "Exclusive" means it cannot be an office and a sewing room; it must be an office
ONLY. See definition of Principle Place of Business.
HOME PRODUCT SALES – MAXIS SE Income Type 03:
Also called Direct Sales Industry.
The activity of selling merchandise on-line, door-to-door, at parties, from trucks/ wagons or from
temporary locations.
INDEPENDENT CONTRACTOR:
An independent contractor is a self-employed person who provides certain services to a client or
owner, (or a third-party) on behalf of the client. An independent contractor is not under the
control, guidance, or influence of the client and, unlike an employee, does not owe a fiduciary
duty. The client neither deducts the payroll or withholding taxes from payments to the
independent contractor, nor contributes the employer's share. To be legally designated as an
independent contractor, an individual must (1) be free from the control of the client, (2) be able to
exercise his or her judgment as to the manner and methods to accomplish the end-result, and
(3) be responsible for the end-result only under the terms of the contract.
If the client states he or she is a self-employed independent contractor and the agency finds this
questionable, check with the parent company. If the parent company says that it considers the
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client to be an independent contractor, then the client is self-employed, barring any other
evidence to the contrary.
IN-HOME DAYCARE: MAXIS SE Income Type 07
The activity of providing day-care for other people's children in the individual’s own home.
ITEMIZE:
List individually all things that make up a set or whole.
LDP:
Loan deficiency payment – as of 6/2/08, no LDP for crops in MN.
LIMITED LIABILITY COMPANY (LLC):
A Limited Liability Company (LLC) is a relatively new business structure. It is a hybrid business
entity having certain characteristics of both a corporation and a partnership. The primary
characteristic an LLC shares with a corporation is limited liability, and the primary characteristic
it shares with a partnership is the availability of pass-through income taxation. An LLC is often
incorrectly called a "limited liability corporation" (instead of company).
LLC:
See Limited Liability Company.
NET OPERATING LOSS:
Net operating loss occurs when a company's allowable tax deductions are greater than its
taxable income, resulting in a negative taxable income. The company can apply the net
operating loss to their past tax payments and receive a tax credit. It could also apply the net
operating loss to future income tax payments, reducing payments they need to make in future
periods.
NOL:
See Net Operating Loss
NORMAL BUSINESS FLUCTUATION:
Normal business fluctuations are simply the ups and downs in a business operation. When
income is averaged, changes due to normal business fluctuations are included in the
calculations. The activities may be related to economic conditions such as supply and demand
and can cause periods of business growth, stagnation or decline. If a business operation’s
nature and scope changes, the resulting changes are not considered “normal business
fluctuations” and are not included when income and expenses are averaged. When changes
that are not normal business fluctuations occur, averaged income needs to be adjusted based
on the change.
OTHER SALES: MAXIS SE Income Type 04
The activity of selling products or goods other than real estate and items defined as home
product sales items.
OTHER SELF EM0PLOYMENT: MAXIS SE income Type 09
The activity of selling products or goods other than real estate and items defined as home
product sales items.
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PAPER ROUTE: MAXIS SE Income Type 06
Also called Newspaper delivery.
The activity of delivering news-papers to people's homes.
PARTNERSHIP:
An unincorporated business owned by 2 or more people. (CM)
A legal contract entered into by 2 or more persons in which each agrees to furnish a part of the
capital and labor for a business enterprise, and by which each shares a fixed proportion of
profits and losses. (The American Heritage College Dictionary, 3rd edition.)
Consider partnerships as self-employment businesses.
PERSONAL SERVICES: MAXIS SE Income Type 05
Also called service industry.
Personal services are the activities that provide services rather than goods to the customer. The
service may offer an improved standard of living or convenience, professional or technical
expertise, or other essential services.
PERSONAL BUSINESS AND/ OR ENTERTAINMENT EXPENSE:
Money spent while on official business, and but not reclaimable as business expenses.
PRINCIPAL PLACE OF BUSINESS:
A place of business is your principle place of business if it is where: (See Home Office principle
place of business for additional information):
 Most of your of business or work is done, or
 You meet customers, clients, patients, investors, associates, etc., in the normal course of
doing business, or
 You store inventory for resale at retail or wholesale, or
 You provide day care services for fees, or
 Any combination of the above four
REAL ESTATE: MAXIS SE Income Type 02
The activities of buying, selling and/or management or development of real property.
REAL ESTATE AGENT:
A real estate agent is a licensed salesperson working for a real estate broker. In the United
States, all real estate agents must be licensed by the state they work in.
REAL ESTATE BROKER:
A real estate broker is a person licensed to arrange the buying and selling of real estate for a
fee. Real estate brokers manage real estate offices.
RENTAL: MAXIS SE Income Type 08
The activity of leasing or renting personal or real property to another person for payment.
ROLLING AVERAGE:
A rolling average is where the average is updated on a monthly basis by subtracting the oldest
month of figures and adding the newest month and calculating a new average with the updated
figures. The rolling average is used in determining income for the MFIP/DWP programs.
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SELF-EMPLOYED FARMER:
To be a self-employed farmer, the person must be engaged in farming activity for the purpose of
producing income. The person must also have direct involvement in the farming activity.
SEPARATE LIVING QUARTERS:
Separate living quarters are classified as a place where the occupants do not live and eat with
any other person in the building and which have direct access from the outside of the building or
through a common hall. The space normally would include kitchen, bedroom and living space
areas. Examples could include a basement apartment or duplex housing.
SOLE PROPRIETOR:
A person who is the sole owner of an unincorporated self-employment business.
SOLE PROPRIETORSHIP:
A sole proprietorship is an unincorporated business that has no existence apart from the owner.
The business liabilities are the personal liabilities of the single owner.
SUBCONTRACTOR:
An individual or company hired by a general or prime contractor to perform a specific task as part
of the overall project
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SE 11.0
FREQUENTLY ASKED QUESTIONS
Table of contents
Definition of Self-employed Individual
FAQ: A client works for one person i.e. lawn mowing for the neighbor. This individual does not have
FICA taken out, but in some cases, the “employer” has set the work hours/schedule. Should
this income be entered STAT/BUSI or STAT/JOBS?
A: Evaluate each situation to determine if there is an employer/employee relationship. In this
situation, based on the information provided it would appear the client doing the lawn mowing
meets the IRS definition of a household employee and would not be considered self-employed. It
is assumed the neighbor provides all the equipment and tells the client how and when to mow the
lawn. It is also assumed that the client does not offer his services to the general public. Income
would be entered on STAT/JOBS.
Anticipating Self-employment Income
FAQ: For SNAP, must we average monthly income & expenses for “all types” of self-employment
(less than 12 months) or are there exceptions to this rule?
A: Yes. Average self-employment income whether or not the unit receives income and incurs
expenses on a monthly basis, count the self-employment income earned each month. Count
roomer/boarder income monthly. [CM 0017.15.33.03]
Verification Sources:
FAQ: Can the Self- Employment Report Form - DHS-3336 be used as verification of income and
expenses?
A: Yes, if the form has been completed as required.
Additional verification would only be required if the information on the DHS-3336 is inconsistent
with other information obtained by the agency or provided by the client. If the client cannot explain
why the inconsistency in the information, ask the client to provide further verification. [CM
0010.15, 0010.18.09]
FAQ: Are business records required for proof of income and expenses? What if they just write out
the income and expenses on a piece of paper?
A: Clients may provide you self-employment income and expenses in several formats. For
businesses in operation over a year, ask for tax returns. If in operation under a year, or the taxes
do not reflect the current business situation business records would be used. The records should
be in an easy to decipher format. If any of the information is inconsistent with other information the
agency has or that the client has provided, ask the client to provide further proof. [CM 0010.18.09]
FAQ: What tax form shows that an individual is actually an employee of a corporation and receives a
salary rather than being self-employed?
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A: C Corporation - IRS forms 1120, 1120S, and the 1120 Schedule K-1 would be an indication that
the individual is an employee of a C-corporation.
FAQ: For SNAP, must we use the tax forms for “all types” of self-employment if there is a 12 month
history of employment?
A: No. Do not use the forms when they are not reflective of the current business situation or if the
client has not filed (use business records or the DHS 3336 Self-Employment Report Form).
However, if they are reflective of the situation, they are an excellent source of data on which to
base the self-employment income calculation. [CM 0010.18.9, 0017.15.33.03]
Self-employment Expenses
FAQ: We are to use the estimated market value of the home and buildings divided by the estimated
market value of the entire property to get the percentage to use for business. Which buildings
are included where?
A: For businesses located on the same property as the home, determine the business portion by
dividing the estimated market value of the business property by the estimated market value of the
entire property. The estimated market value of the entire property would include all land, the home
and any other buildings on the property. Include as business property any land or buildings used
for the self-employment business.
FAQ: Are we allowed to use the percentages used on IRS tax forms to determine selfemployment business/home ratio in determining eligibility for SNAPand/or MFIP?
A: Yes, if the percentages used on the tax forms appear reasonable. Other sources of
information would be the client’s records, the mortgage lender, the tax assessor and for
farmers, the Farmer’s Home Administration. [CM 0017.15.33.09, 0017.15.33.24]
Farming
FAQ: Are crop droughts and bumper crops changes for which you can adjust the farm income
and approve new SNAP/MFIP benefits?
A: Yes. Reported changes that affect the nature or scale of the business such as a change in
the type of farm operation, the amount of land farmed, drought or crop failure, a substantial
change in market prices, etc. which would affect the net income must be taken into
account. [CM 0017.15.33.03, 0017.15.33.24]
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