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State of Wisconsin |
Release 24-02 |
Earned income is income from gainful employment.
Earned income after pre-tax deductions is counted. See Section 16.3.2 Pre-Tax Deductions for more information on pre-tax deductions.
1. Contractual Income
This provision applies primarily to teachers and other school employees. When an employed BadgerCare Plus group member is paid under a contract, either written or verbal, rather than on an hourly or piecework basis, the income is prorated over the period of the contract. For example, if the contract is for 18 months, the income is prorated over 18 months no matter the number of installments made in paying the income. The income is prorated even if one of the following is true:
2. Income In-Kind
Count in-kind benefits as earned income if they are all of the following:
Do not count the following:
In-kind room and board for employees may be considered not countable income in situations where it is provided as a convenience to the employer and when it is provided on the employer’s premises. Do not include the value of room or board if the following conditions are met:
| Example 1 |
Alicia is working as a resident assistant at the college she attends. In exchange for working, she receives lodging in a residence hall and a meal plan at the college during the semesters she works. The college requires her to live in the residence hall and use the meal plan as part of her job as a resident assistant. Do not count Alicia’s room and board as in-kind income. |
To determine the value of in-kind benefits, use the prevailing wage (but not less than the minimum wage) in the community for the type of work the person does to earn the benefits.
3. Wage Advances
Count advances on wages as earned income in the month received.
4. Severance Pay
Count severance pay as earned income in the month of receipt. Count severance pay that has been deferred at the employee’s request or through a mutual agreement with their employer as earned income when they would have received the amount had it not been deferred.
5. Workers' Compensation
Do not count workers' compensation as earned income.
1. Income Received by Members of a Religious Order.
If a person is a member of a religious order and has taken a vow of poverty, do not count any compensation that a member of a religious order receives if the compensation is turned back over to the order.
2. Housing Allowances for Members of the Clergy.
If an ordained, licensed, or commissioned minister receives a housing or housing utility allowance, do not count as income the portion of the allowance that is used for housing. The unused portion of the allowance must be counted as income.
If an ordained, licensed, or commissioned minister receives as part of their salary an amount officially designated in advance of payment as a housing allowance, and the amount is not more than reasonable pay for the minister's services, do not count as income the lesser of any of the following amounts.
If housing expenses are not verified, the entire housing allowance must be counted as income. Eligibility must not be denied or terminated for failure to provide the requested verification.
3. Jury Duty Payments.
Count all jury duty payments as earned income for the month in which it is received if the payments are not turned over to the individual’s employer. Amounts received separately as reimbursements or allowances for travel to and from the courthouse, meals, and lodging during jury duty are not countable.
4. AmeriCorps.
Earnings or cash benefits received through AmeriCorps will be counted as earned income. Educational awards received from AmeriCorps are not counted as income.
| Note |
This does not include earnings or cash benefits received through VISTA (see Section 16.2 Income Types Not Counted, #22 Special Programs). |
5. Title V—Older Americans Act of 1965.
Count only wages and salaries paid to individuals as a result of their participation in a program funded under Title V of the Older Americans Act of 1965 as earned income. These programs include, but are not limited to the following:
Identify programs funded under Title V of the Older Americans Act using documents provided by the member, contacts with the provider, or a local council on aging.
Do not count reimbursements (see Section 16.2 Income Types Not Counted, #19 Reimbursements).
6. Live-in care providers.
Do not count any wages of a live-in care provider if those wages meet the required conditions listed in Section 16.2 Income Types Not Counted, #47 Live-In Care Providers. See Section 16.4.4.2 Live-In Care Providers for more information about verifying whether the wages should be counted.
Count income that an inmate earns from a prison or jail job that pays less than minimum wage, such as jobs through Badger State Industries (BSI). This income does not need to be verified.
There are no special deductions if the income is reported as room and board income. If room and board income is reported as self-employment income, see Section 16.4.3 Self-Employment Income.
Self-employment income is income derived directly from one's own business rather than as an employee with a specified salary or wages from an employer.
Business means an occupation, work, or trade in which a person is engaged as a means of livelihood.
A business is operating when it is ready to function in its specific purpose. The period of operation begins when the business first opens and generally continues uninterrupted up to the present. A business is operating even if there are no sales and no work is being performed. Thus a seasonal business operates in the off season unless there has been a significant change in circumstances (see Section 16.4.3.4.3 Anticipated Earnings).
A business is not operating when it cannot function in its specific purpose. For instance, if a mechanic cannot work for four months because of an illness or injury, and there is no one else to carry out the duties of the business, they may claim their business was not in operation for those months.
Real property means land and most things attached to the land, such as buildings and vegetation.
Non-real property means all property other than real property. Non-real property is personal or business property that typically is movable rather than attached to land.
A farm or other business should be identified according to the following criteria:
A farm or other business is organized in one of the following ways:
A self-employed person who earns more than $400 net income must file an end-of-year return. A person who will owe more than $400 in taxes at the end of the year must file quarterly estimates.
IRS tax forms for reporting self-employment income are listed below.
A person is an employee if they are under the direct "wield and control" of an employer. The employer has the right to control the method and result of the employee's service. A self-employed person earns income directly from their own business, and:
| Note |
A babysitter who works in someone else's home is considered an employee of that household even if the individual employing them does not withhold taxes or FICA. |
Examples of self-employment include:
All self-employment income is earned income, except royalty income and some rental income.
Self-employment income is income that is reported to the IRS as farm or other self-employment income or as rental or royalty income. When income is not reported to the IRS, the worker must judge whether or not it is self-employment income.
Self-employment income sources are:
Rental Income Not Reported as Self-Employment Income
When a BadgerCare Plus group member does not report rental income as self-employment income, the net rental income is counted as unearned income. Determine net rental income as follows:
A. When the owner is not an occupant, net rental income is the rent payment(s) received minus the interest portion of the mortgage payment and other verifiable operational costs.
B. When the owner is an occupant (of a duplex, triplex, etc.) and lives in one of the units, determine net rental income as follows:
| Example 1 |
George owns a four-unit apartment building and lives in unit 1. His annual interest paid on his mortgage for the most recent tax year is $9,765. His operational expenses, including taxes on the building, from the most recent taxes is $12,359. This totals $22,124. This amount divided by four units equals a proportionate share of $5,531. $5,531 multiplied by three rental units equals $16,593. This represents his total budgetable annual expenses. His total annual rental income equals $28,800 ($800 per unit per month). $28,800 -$16,593 $12,207 $12,207 / 12 = $1,017.25 net monthly rental income |
Calculate BadgerCare Plus income in one of the following ways:
IM workers do not fill out any IRS tax forms on an applicant’s or member’s behalf. It is the responsibility of the applicant or member to complete IRS tax forms.
Workers should consult IRS tax forms only if all of the following conditions are met:
If all three conditions are not met or if IRS tax forms were not filed and are not available, use anticipated earnings (see Section 16.4.3.4.3 Anticipated Earnings).
If you decide to use IRS tax forms, use them together with the chart in Process Help, Section 16.2 Self-Employment Income or the self-employment income worksheets, which identify which income and expenses must be entered onto the Self-Employment page by line on the IRS tax forms.
For each operation, select the worksheet you need (if applicable) and, using the provided tax forms and/or schedule, complete the worksheet (if applicable) and enter the income and expenses onto the Self-Employment page.
CWW will calculate the monthly countable income for each self-employment business, which will be added to the fiscal test group's other earned and unearned income. If monthly income is a loss, the loss will be subtracted from the non-self-employment income.
When a household has more than one self-employment operation, the losses of one may be used to offset the profits of another. Losses from self-employment can be used to offset other income types. In situations where an individual is planning to file a joint tax return with their spouse, losses from self-employment may offset the spouse’s income.
Each self-employment operation (Sole Proprietor, Partnership, S Corporation) requires its own Self-Employment page in CWW.
Remember that while a salary or wage paid to a test group member is an allowable business expense, you must count it as earned income to the payee. Similarly, dividends or other types of passive income (as defined by the IRS) must be counted as unearned income.
Even though IRS Schedule D (Form 1040) – Personal Capital Gains and Losses is associated with sole proprietorships, it is not considered self-employment income. If someone reports personal capital gains or losses, it is counted as unearned income (see Section 16.5 Other Income).
Countable self-employment income will be the same as the net self-employment taxable income.
Depreciation and depletion expenses are allowable expenses.
The following expenses are disallowed expenses for BadgerCare Plus:
| Note | The self-employed person's personal contributions to pensions and retirement programs can be counted for BadgerCare Plus as tax deductions, but they are not counted as business expenses when calculating the self-employment income. See Section 16.3.3 Tax Deductions. |
| Note |
Disallowed expenses are added back into an individual’s gross income on the BadgerCare Plus Budget page. |
If past circumstances do not represent present circumstances, workers should calculate self-employment income based on anticipated earnings. Anticipated earnings should be used in the following situations:
IM workers should determine whether it is necessary to use anticipated earnings on a case-by-case basis and document the reasons for the determination in case comments.
The date of an income change is the date a worker and applicant (or member) agree that a significant change in circumstances occurred. IM workers must also judge whether the person's report was timely to decide if the case was overpaid or underpaid. Changes are then effective according to the normal prospective budgeting cycle. IM workers should not recover payments made before the agreed on date.
The Self-Employment Income Report form (F-00107) (also called a SEIRF) and the Self-Employment Income Report: Farm Business form (F-00219) simplify reporting income and expenses when earnings must be anticipated. Self-Employment Income Report forms can be used to report income for any type of business with any form of organization. However, some people, especially farm operators, may find it easier to complete the applicable IRS Form 1040 schedule when income and expense items are more complex.
For anticipated earnings to be determined, the applicant or member must complete a Self-Employment Income Report form for the months of operation since the significant change in circumstances occurred, not to exceed 12 months. (Note: The beginning of a business is a significant change in circumstances.) When requesting verification, the SEIRF will be prepopulated with the individual’s and business’ information and will identify each individual month for which income and expenses are needed. However, they may complete a separate Self-Employment Income Report form for each month or combine the months on one Self-Employment Income Report form.
When a new self-employment business is reported or when a significant change in circumstance occurs, recalculate self-employment income as follows:
| Example 3 |
James applies for BadgerCare Plus on November 1, 2017. He reports that he was self-employed starting in April 2017. The agency asks James to complete Self-Employment Income Report forms for April, May, June, July, August, September, and October so that his prospective self-employment income can be determined for his BadgerCare Plus certification period (November 2017 through October 2018). |
| Example 4 |
Bonnie applies for Child Care and BadgerCare Plus on April 5, 2016. She reports that she was self-employed starting in January 2016. The agency asks Bonnie to complete a Self-Employment Income Report form for January, February, and March so that her prospective self-employment income can be determined for her Child Care and BadgerCare Plus certification period (April 2016 through March 2017). |
| Example 5 |
Ricardo applies for FoodShare and BadgerCare Plus on February 5. He was self-employed starting December 15. The agency asks Ricardo to complete a Self-Employment Income Report form for December, January, and February so that his prospective self-employment income can be calculated. The completed Self-Employment Income Report form includes Ricardo’s actual income and expenses for December and January, and his expected income and expenses for February. The worker divides the total by three to determine an anticipated monthly average income amount. This amount would be used until Ricardo reports a significant change in self-employment or until Ricardo renews his benefits. |
| Example 6 |
Jenny is a BadgerCare Plus member who has been self-employed as a hairdresser since 2012. Jenny’s BadgerCare Plus certification period is December 2015 to November 2016. The worker used Jenny’s 2014 tax return to establish a monthly income amount. In March 2016, Jenny reports that she has been unable to work since breaking her arm on February 17. She is not sure when she will be able to return to work, but it will not be until at least May. Jenny completes a Self-Employment Income Report form for February 17–February 28 (actual income since the significant change in circumstance occurred), and for March and April using a best estimate of income. The worker uses these three months (February, March, and April) to determine a prospective self-employment income estimate for the remainder of the certification period (through November 2016). |
Use the average until the member’s next renewal, until the person completes an IRS tax form, or until a significant change in circumstances is reported between renewals.
Self-employment income is averaged over the number of months the business has been in operation in a tax year or anticipated based on an average of SEIRFs. It is not based on exact income for a single month, as that does not take into consideration seasonal work and fluctuating income for the business. If an individual had applied in a backdated month, eligibility would not be determined on the basis of one month of self-employment income; instead, eligibility would be based on an average of at least three months of income.
When a self-employed applicant or member requests backdated benefits for health care, workers must do the following:
| Example 7 |
Maggie applied for BadgerCare Plus in June and requested backdated eligibility to March. She has been self-employed as a seamstress since February of the same year. She does not file taxes. For the application month of June, SEIRFs would be used for all available months – February, March, April, and May to budget average income for the month of June and ongoing. If she had applied in March, her income would have been averaged based on actual income for the months of February, March, and April, so SEIRFs for February, March, and April would be used for determining her eligibility for BadgerCare Plus for the backdated months of March, April, and May. |
| Example 8 |
Glenn applied for BadgerCare Plus in September and requested backdated eligibility to June. He has been self-employed as a farmer but reported having a true significant change in circumstances in May. For the application month of September, SEIRFs would be used for all months since the significant change – May, June, July, and August to budget average income for the month of September and ongoing. If he had applied in June, his income would have been average based on actual income for the months of May, June, and July, so SEIRFs for May, June, and July would be used for determining his eligibility for BadgerCare Plus for the backdated months of June, July, and August. |
| Example 9 |
Hershel applied for BadgerCare Plus and FoodShare for himself in April and requested backdated eligibility to January. He owns a bakery and filed taxes. However, he reports that his previous year’s taxes no longer reflect his earnings due to a true significant change that occurred in March. For the application month of April, SEIRFs would be used for all months since the significant change occurred in March, so Hershel’s actual income for March and estimated income for April and May would be used to budget average income for the month of April and ongoing. If he had applied in January, taxes would be used as verification of his income, so his taxes can be used for determining his eligibility for BadgerCare Plus for the backdated months of January and February. However, because of the significant change in March, an average of March, April, and May SEIRFs would be used for determining his eligibility for BadgerCare Plus for the backdated month of March. |
Self-employment income information is not available through data exchanges and therefore must be verified (see Section 9.10 Questionable Items).
Completed IRS tax forms (see Section 16.4.3.4.1 IRS Tax Forms and Worksheets) are sufficient verification of farm and self-employment income. If tax forms are not available or cannot be used because of a significant change in circumstances, a completed and signed Self-Employment Income Report form(s) is also sufficient verification.
| Note |
It is not necessary to collect copies of supportive verification, such as receipts from sales and purchases. However, verification can be requested when the information given is in question (see Section 9.10 Questionable Items). If requesting verification, workers must document the reason for the request in case comments. |
If a Program Add request is made on a case with self-employment income, use the existing SEIRF information, instead of re-verifying it, if all of the following are true:
Count the time a self-employed person spends on business-related activities involving planning, selling, advertising, and management, along with time spent on the production of goods and services provided as hours of work. Do not request verification of self-reported monthly hours worked unless questionable (see Section 9.10 Questionable Items).
Because contract agencies may or may not treat payments to a live-in care provider as exempt from federal taxation, workers must not rely on 1099 forms to verify whether the payments are tax exempt. Instead, if an applicant or member claims to be a live-in care provider with tax-exempt income, workers must provide the applicant or member with a Verifying Tax-Exempt Income for Live-in Care Providers form (F-02193) and ask them to complete it to attest to meeting the criteria that makes this income exempt. If there is a reason to question some or all of the information provided on the form, workers may seek additional verification.
This page last updated in Release Number: 24-02
Release Date: 08/22/2024
Effective Date: 08/22/2024
The information concerning the BadgerCare Plus program provided in this handbook release is published in accordance with: Titles XI, XIX and XXI of the Social Security Act; Parts 430 through 481 of Title 42 of the Code of Federal Regulations; Chapter 49 of the Wisconsin Statutes; and Chapters HA 3, DHS 2 and 101 through 109 of the Wisconsin Administrative Code.
Notice: The content within this manual is the sole responsibility of the State of Wisconsin's Department of Health Services (DHS). This site will link to sites outside of DHS where appropriate. DHS is in no way responsible for the content of sites outside of DHS.
Publication Number: P-10171