Treatment of Expenses 430-05-30-55-15

(Revised 01/01/04 ML2893)

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Certain costs of doing business are allowed as deductions from gross monthly self-employment income. Self-employment income for food stamp purposes is not computed the same as it is for Internal Revenue purposes. The IRS forms are only used for verification purposes.

 

Day Care Meal Expenses

Reimbursement, which may include the food stamp household’s own children, is available to providers who are registered or licensed. The reimbursement is not counted as income and is not an allowable deduction.

 

Some of the programs are:

 

Households that are not reimbursed that derive income from day care may elect one of the following methods of determining the cost of meals provided to individuals. The household's choice must be clearly documented in the casefile.

  1. Actual documented cost of meals.
  2. A standard daily amount of $5.00 per individual regardless of the number of hours of care provided.
  3. Current reimbursement amounts used in the Child and Adult Care Food Program. These are:

 

   

Breakfast

$ .94

Lunch

1.72

Supper

1.72

Snacks

.51

 

A maximum of two meals and one snack, or two snacks and one meal can be claimed per child, per day.

 

Allowable Expenses

The worker must determine if an expense is allowable based on whether the expense is part of producing income.

 

Example:

Veterinary expenses are allowed for a self-employment enterprise where livestock or animals are part of the operation.

 

This list is not all-inclusive.

  • payments on business or operating loans
  • payments on income producing real estate and capital assets such as equipment, machinery, and other durable goods.

Care must be taken to ensure that the interest portion of the payment is not doubled as the interest expense is shown on the income tax forms.

  • payments on income producing real estate and capital assets, equipment, machinery, and other durable goods.

Verification of the principal amount must be obtained from a source such as the sales contract that states the amount of the monthly/yearly payments on the income producing property or capital asset. The principal portion is not shown on the tax forms as it is not a deductible expense for income tax purposes.

If a household’s home is on property connected to property used for self-employment, the worker must determine if the shelter costs and the self-employment costs can be separately identified. Proration may be used to separately identify costs based on information from a mortgage lender, real estate tax record, Farm Service Agency documents, insurance premiums, etc.

If a household’s home is on property connected to property used for self-employment, the worker must determine if the shelter costs and self-employment costs can be separately identified.

 

Self-employment households where utilities are measured and billed separately are entitled to the appropriate mandatory utility allowance for its residence and to the separately billed self-employment costs as a cost of doing business.

 

Self-employment households where there is only one meter must use the appropriate mandatory utility allowance and are not entitled to an exclusion of utilities as a cost of doing business.

 

Non-Allowable Expenses

The worker must determine if an expense is non-allowable based on whether the expense is part of producing income.

 

Example:

Wages paid to household members.

 

This list is not all-inclusive.

Examples:

  1. An IRS penalty imposed on an owner for failure to pay an employee's Social Security tax is not an allowable cost of doing business.
  2. Penalties imposed by the United States Department of Agriculture for failure to comply with planting and marketing programs are not allowable costs.