1. (a)

   1. (1) Like employee earnings, the monthly amount of self-employment earnings that must be considered is the agency’s best estimate of earned income that will be available to the individual in a month or months.
   2. (2) Costs directly related to producing the income are subtracted from the self-employment gross.
   3. (3) Only those costs without which the income could not be produced will be subtracted.

   4. (4) Such costs do not include:

      1. (A) Depreciation;
      2. (B) Personal business and entertainment expenses;
      3. (C) Personal transportation;
      4. (D) Purchase of capital equipment; and
      5. (E) Payments on the principal of loans for capital assets or durable goods.
2. (b) Also, income deposited into a micro-enterprise escrow account will be deducted from the self-employment income prior to computing monthly gross earnings.
3. (c) For room and board income, a standard one hundred twenty dollars ($120) per roomer/boarder will be subtracted as the cost related to producing the income.

4. (d)

   1. (1) Self-employment earnings are usually not as predictable as employee earnings and are often received less frequently than monthly.
   2. (2) Therefore, in most situations, a time period longer than two (2) months should be used to determine average monthly self-employment earnings.

5. (e) Income received less frequently than monthly (quarterly, annually, etc.).

   1. (1) Income of this type may include farming, including soil bank and related diversion payments), cattle ranching, business, or any other type of self-employment enterprise in which the income resulting from work performed over a period of time is received at one (1) time rather than during the period in which the work is being performed.

   2. (2)

      1. (A) The first step in computing monthly gross earnings in these situations is to calculate the gross annual income for the previous calendar year.
      2. (B) If available, the individual’s federal income tax return may be used to determine the annual income and the amount of costs related to producing the income.
      3. (C) The annual allowable costs are subtracted from the gross annual income.
      4. (D) The remainder is then divided by twelve (12) to arrive at an average monthly amount.
      5. (E) This figure is treated as gross earned income. Example: After expenses, Ms. Smith earns one thousand two hundred dollars ($1,200) annually from farming. This amount prorated over twelve (12) months equals one hundred dollars ($100) per month. Therefore, one hundred dollars ($100) gross earnings would be considered for TEA purposes.

   3. (3)

      1. (A) If the previous year’s income is not a fair reflection of the current year’s income, the worker may determine, by averaging recent months or other means, an amount that will fairly reflect the current year’s income.
      2. (B) The case record should be documented to clearly reflect the manner in which the income was determined and the basis for considering it a fair reflection of the current year’s income.

6. (f) Income received monthly or more frequently (weekly, daily, etc.).

   1. (1) Income of this type may include:

      1. (A) Room and board payments;
      2. (B) Babysitting;
      3. (C) Sales from Avon, Tupperware, etc.; or
      4. (D) Any other type of self-employment in which the income is received at least monthly as the work is performed.

   2. (2)

      1. (A) The first step in computing monthly gross income in these situations is to determine an average monthly gross based on the latest two (2) months’ income.
      2. (B) Verification of the latest two (2) months’ gross income and costs related to producing the income should be obtained.
      3. (C) After allowable self-employment costs are subtracted from the monthly gross, an average of the latest two (2) months will be determined to arrive at the monthly gross earnings, which will be used to determine income eligibility.
   3. (3) Note. A standard one hundred twenty dollars ($120) per roomer/boarder will be subtracted as the allowable costs for producing room and board income. Example: Ms. Woods sells Tupperware products and provides copies of her last two (2) months’ order invoices. These show her total sales and the items she had to purchase such as hostess gifts, receipt books, etc. For each month, her total gross income from sales less the costs related to producing the income is determined. These amounts are then averaged to arrive at a monthly gross earnings amount of two hundred fifty dollars ($250).

   4. (4)

      1. (A) If the latest two (2) months’ income is not a fair reflection of the individual’s current income, then another method to determine the average monthly income may be used, e.g., an average of more than two (2) months’ income.
      2. (B) The case record should be documented to clearly reflect the manner in which the income was determined and the basis for considering it a fair reflection of current income.
7. (g) The self-employment income computation will be documented in the case record.

Codification Notes: This section as promulgated prior to codification into the Code of Arkansas Rules provided as follows: “3/15/00”