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Effective: April 1, 2009 |
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20.25.20.10ar2 - MA/GAMC Self-Employment Income (Archive) |
Archived: February 1, 2010 |
Determine self-employment income using either the MA Method A calculation or the MA Method B and GAMC calculation. Each calculation allows different deductions.
Use tax forms (or business records if tax forms are not available) to determine the self-employment income. The self-employment income is generally the gross receipts minus business expenses.
Note: See Income Changes for information on how to determine self-employment income when there has been a change.
This section provides more specific information on what deductions are or are not allowed in calculating the self-employment income for MA and GAMC. Additional general guidelines are found in Self-Employment Income.
Specific Types of Self-Employment Income.
Follow these rules when calculating the MA Method A self-employment income:
l Allow capital gains and capital losses if they are part of the self-employment business.
Note: Allow capital gains and losses that can be distinguished from other business income only if the household expects similar gains or losses in the coming year.
l If an applicant or enrollee operates more than one self-employment business, deduct a loss from one business from any profit of a second business.
l Certain business expenses are not allowed as deductions from self-employment income for MA Method A purposes. These deductions found on the business schedules of the tax return or in business records should be added to the net profit or loss of the business before completing the MA income calculation.
The following expenses are not allowed as a business deduction:
l Carry forward net operating loss (NOL) from a previous tax year.
l Personal federal, state, and local income taxes.
l The self-employed client's share of FICA.
Note: Allow the employer's share of FICA payments made for employees who are not members of the MA or GAMC household.
l Money set aside for the self-employed person's own retirement.
l Work-related personal expenses.
l Payments on principal of loans.
Note: Allow interest payments as a self-employment expense.
l Charitable contributions.
l Depreciation.
l Wages or other benefits paid to a member of the MA or GAMC household, regardless of whether that person is applying for or receiving MA or GAMC.
l Any expenses not allowed by the IRS, unless specifically authorized by this manual.
l The costs of building an inventory.
Note: Deduct the cost of a product only after it sells.
l Personal and entertainment expenses.
Follow these rules when calculating the MA Method B and GAMC self-employment income:
l Allow deductions for all expenses the IRS allows as a self-employment expense.
Note: Add any expenses not allowed by the IRS back into the total profit or loss.
l Deduct a self-employment loss from other household earned income.
Specific Types of Self-Employment Income
For instructions on how to treat specific types of self-employment, see: