Kansas Department of Health & Environment

Kansas Family Medical Assistance

Manual (KFMAM)

Eligibility Policy - 9/16/2021

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06200 Self-employment Income Budgeting - See 5330 for guidelines to determine if an individual is self-employed. Self-employment income will be based on the countable net income as reported on the Federal tax return. The individual will be required to provide a copy of the most recent tax return. If the individual does not file taxes or has not yet filed taxes because this is a new self-employment enterprise, or the current return is not representative, completion of the KC5150 self-employment worksheet by the individual is required.

6210 Tax Return Filed - When a tax return has been filed, the countable amount of self-employment is taken directly from the form. The following outlines the line on the tax form used for each type of business:

1) Schedule C: Line 31
2) Schedule C-EZ: Line 3
3) Schedule F: Line 34
4) Schedule E rental Income: Line 26
5) Schedule E Partnership or S-Corp: Line 32

When a loss is reported on the tax form, it is to be treated as zero income for the eligibility determination and cannot be deducted from another source of income, even if the other source is another form of self-employment.

Provided the return reflects a full year of self-employment earnings, a twelve month average shall be established.

6211 Tax Return Not Filed or Does Not Contain Full Year's Earnings - If a tax return has not been filed (e.g., employment just started or client has not filed a return), the KC5150- Self-employment worksheet is required. The applicant is required to complete the worksheet documenting all income and expenses for the 12 months prior to the month of application. Ledgers and other business records are not accepted as verification of self-employment income.
An average is determined by totaling all gross earnings in the months being counted, subtracting the total expenses, and dividing by the respective number of months. The calendar months being used and the corresponding earnings must be clearly documented in the case record.

6212 Need for New Estimate/Average Based on Changes in Income - In cases where the consumer indicates their tax return is not representative of the existing self-employment income, both the tax return and the self-employment worksheet are required so staff may evaluate this. The reason for the discrepancy must also be clearly documented by the applicant and is only allowed when there is a definitive change in the amount of business.

6220 Wages from a business - When a business owner pays themselves a wage from the business, this is to be treated as a separate from of income and budgeted separately from the self-employment. Verification of the wages shall follow the Tiered verification policy. However, when the income cannot be verified using Reasonable Compatibility, alternative methods of verification are allowed. For 2017 tax year and prior - line 7 of the 1040 tax return may be used if the individual indicates that the wages are only representative of those that have been paid from the business and not a combination of other jobs held. For 2018 tax year and future - line 1 of the 1040 tax return would need to be used. When no other verification is available, self-attestation of the wages is accepted.

6230 Capital Gains - - For individuals who report self-employment income and provide a tax return as verification, any amount from Capital Gains or Other Gains is countable. For tax year 2017 and prior - the amounts of gains reported on form 1040 on Line 13 or Line 14 shall be used. For tax year 2018 and future – the amount of gains reported on Line 12, Line 17 or Line 18 on the Schedule one (1) shall be used. These amounts will need to be prorated over the year. This will mean dividing the total by 12 to determine the monthly countable amount.

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