Earned income is income which is received as wages, salary, or profit resulting from the performance of services, including managerial responsibilities, by the recipient. Earned income may be derived from self-employment in the client's own business, or from wages or salary received as an employee including bonus pay received while an employee. Wages received from OJT are also to be considered as earned income unless received by a TANF child who receives WIOA [see 6410].
In addition, sick pay received for time off while working (i.e., short-term illness) shall be considered earned income when the person is still considered an employee by the employer and the person will be returning to work when recovered. This includes payments from temporary disability insurance in which the employer participates in the premium and temporary worker's compensation provided the individual is still considered an employee pending recuperation. If the person is not considered an employee while collecting the benefits (either sick pay or disability benefits), the benefits must be counted as unearned income per 6200.
Wages withheld by the employer to purchase benefits are counted as earnings in the pay period that the employee would have normally received them. Benefit "credits" offered in addition to wages which can be used to purchase benefits are not counted as income. If the employee does not use all of the credit to purchase benefits, and the employer pays the excess to the employee as part of their wages, the excess paid is counted as earned income.
Regular earned income results from earnings which are reasonably assured to be available in the same monthly amount in the future. See and subsections for budgeting. See 7100 and subsections for budgeting.
Irregular earned income results from earnings which vary in amount from month to month and are expected to continue. From a practical standpoint, irregular earnings result from full- or part-time employment when payment is received on any basis other than monthly or twice a month. See 7100 and subsections for budgeting.
Self-employment income is earned income received directly from one's own business, trade, or profession. Some guidelines to determine if an individual is self-employed include whether the person: (1) holds himself out as a business (e.g., advertises), (2) decides when and where to work, obtains own jobs or sales, and pays own expenses, (3) has a risk of a profit or loss, and (4) pays his own FICA and income taxes (although this guideline, by itself, does not necessarily establish self-employment). The absence of one or more of these criteria indicate that the activity is not self-employment. Each situation must be evaluated on a case-by-case basis and documented in the case file as to whether a certain income is self-employment or not. An adjusted gross income amount must be determined by deducting income producing costs from the gross earnings.
Intermittent earned income is received on other than a monthly basis such as quarterly, semiannually, or annually. Such income is to be considered and averaged. Intermittent earned income received prior to the first eligibility period shall not be considered.
Training allowances and incentive payments and maintenance payments from vocational and rehabilitation programs recognized by federal, state, or local governments to the extent they are not a reimbursement are considered earned income. This includes wages earned through a job try out arranged through a CDC or through an industrial evaluation arranged through KETCH.
Compensated Work Therapy (CWT) payments made by the VA are considered earned income. CWT is designed to provide both vocational and rehabilitative services to veterans participating in the program.
Maintenance payments made by Kansas Rehabilitation Services are considered a reimbursement and are thus exempt. See 6410 (49).
Stipends to Native American which are intended to cover living expenses are also considered earned income.
Wages are sometimes paid in advance to an employee, usually at the request of the employee. Wage advances are not counted as income received. Repayment of those advances are not deducted from gross income, either.
However, wages held by the employer as a general practice, even if in violation of the law, shall not be counted as income to the household. For example, it is routine in many places of employment for the first week or two weeks of wages to be withheld and not paid until the following pay period. This is legal and the wages would not be counted until received.
Income derived from the sale of blood shall be treated as earned income.
FSSA payments made by the military to certain members of the Armed Forces is considered earned income for all programs. This program was implemented May 1, 2001, and provides certain members of the Armed Forces with a special allowance to partially address the issue of enlisted members relying on food assistance to make ends meet. Qualifying members and their families are eligible for a cash allowance up to $500 per month. The law authorizing the program, Public Law 106-398, does not prohibit members from receiving FSSA benefits and food assistance at the same time. The amount of the FSSA will be shown on the member's Leave and Earnings statement.
Income earned from an employer which forces the worker to absorb significant expenses in order to remain employed is treated as self-employment income. These positions generally require the employee to enter into a contractual relationship with the employer.
Examples of this type of employment would include a truck driver who is required to purchase or lease his own truck, a rural mail carrier who must provide his or her own vehicle or pay all travel expenses. The presence of additional expenses must be verified and documented. Such expenses must be directly related to the person’s employment and required to maintain employment. Expenses cannot be reimbursed. Earnings dependent only upon typical deductions from income (such as state and federal taxes, OASDI, Medicare, and other mandatory or optional deductions) do not meet this criteria. In addition, persons required to incur only nominal expenses, such as mechanics required to purchase their own tools or regular postal employees required to purchase uniforms do not meet this criteria. These situations are to be evaluated on a case-by-case basis. The presence of a contract requiring the employee to provide equipment or cover costs necessary for employment is the primary indicator of income classified as contract labor.
A monthly payment made by the military to certain members of the Armed Forces, replacing the Variable Housing Allowance (VHA) and Basic Allowance for Quarters (BAQ). BAH (BAQ or VHA) is countable earned income.
Royalty income is compensation paid to the owner for the use of property (usually copyrighted material such as books, magazine articles, manuscripts, music, or artwork), or natural resources (such as minerals, oil, gravel, or timber). Royalty compensation is generally expressed as a percentage of receipts from using the property, or as an amount per unit produced from using natural resources.
NOTE: An outright sale of natural resources by the owner of the land or by the owner of rights to use the land constitutes conversion of a resource. The proceeds from the conversion of a resource are not income. See 5200(12).
In general, royalty payments for the use of property are considered to be self-employment earned income (see 7122.3). Payments for the use of natural resources are considered unearned income. However, the countable amount of payments for the use of natural resources maybe reduced by any severance taxes levied against the production of there source [see 6410 (42)].
Example 1: An author receives monthly payments for publication of books she wrote. Since writing is her trade of business, the payments are considered self-employment earned income. The amount of countable income is based on either her federal tax return or the information provided on the KC-5150, Self-Employment Worksheet.
Example 2: An individual receives quarterly payments from his mineral rights interest in a producing oil well. Since this is not his trade or business, the payments are considered unearned income. However, any severance taxes associated with the oil production may be deducted from the gross payment amount.
Example 3: A musician receives annual payments from a record company for sales from a song she wrote. Since this is her trade or business, the payments are considered self-employment earned income. The amount of countable income is based on either her federal tax return or the information provided on the KC-5150.
Example 4: A landowner sells his timber rights to a logging company that clear cuts the designated acreage and makes a one-time payment to the landowner. This is not a royalty payment. Rather, it is a conversion of property from one form to another (timber to cash).
The payment is not considered income in the month received. The payment is considered a resource in the month after the month received.