(Revised 10/01 ML #2711)
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Guidelines for gathering earned and unearned self employment, rental and royalty income information from the federal income tax forms will be issued annually. (See Forms Appendix for updated self-employment guidelines.)
FARM AND/OR OTHER SELF EMPLOYMENT INCOME:
Net Profit (or loss) from IRS forms
+Capital gains/losses on sale of property
+Depreciation
+Depletion
Total Business Profit
Information for each business must be calculated separately.
When the total business 'profit' as calculated above shows a loss, such loss will be calculated at zero income for purposes of this program. Gross income from other sources, such as wages, will be calculated at face value; that is, income losses from self employment cannot be used to offset or reduce income from other sources.
|
Example 1: |
Example 2: |
|
-4,000 Net loss from business |
-10,000 Net profit from business |
|
+5,000 Depreciation |
+ 5,000 Depreciation |
|
+2,000 Depletion |
|
|
___________________________ |
_________________________ |
|
3,000 Net Business Profit |
-5,000 Net Business Loss = zero income |
PARTNERSHIP/FAMILY-CONTROLLED CORPORATION INCOME
For LIHEAP purposes the procedure for determining income from partnerships and family-controlled corporations is much the same as for other self employment. Some of the needed information is reported on a K-1 form which is then filed with the individual income tax forms to support the income reported on Schedule E. However, some items such as depreciation and depletion, are already deducted from the partnership or corporation total income before the K-1 is completed, so it will be necessary to see the partnership/corporation IRS returns to calculate the applicant's share of these items. Contact the State Office for assistance in reading these returns, if you have problems locating the line references you need.
Losses from partnerships/family-controlled corporations will be converted to zero before they are combined with other sources of income, such as wages.
NOTE: A corporation is not required to distribute all income, at the time it is earned, to its shareholders. If the corporation elects to withhold the distribution of income, it is ordinarily not available to shareholders. An exception occurs when the shareholders who are able to control the corporate decisions are also applying for assistance. For purposes of LIHEAP eligibility, a household which controls a family-owned corporation is regarded as having received undistributed corporate income. Therefore the amount of income on the Schedule K-1 SHALL be counted as household income, whether or not it has been distributed.
