Self Employment Status

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Revised March 23, 2012

WAC 388-450-0080

What is self-employment income?

WAC 388-450-0080

Effective July 15, 2010

WAC 388-450-0080 What is self-employment income?

This section applies to cash assistance, Basic Food, and medical programs for children, pregnant women and families.

1. Self-employment income is income you earn from running a business, performing a service, selling items you make, or re-selling items to make a profit.

2. You are self-employed if you earn income without having an employer/employee relationship with the person who pays you. This includes, but is not limited to, when:

a. You have primary control of the way you do your work; or

b. You report your income using IRS Schedule C, Schedule C-EZ, Schedule K-1 or Schedule SE.

3. You usually have an employer/employee relationship when:

a. The person you provide services for has primary control of how you do your work; or

b. You get an IRS Form W-2 to report your income.

4. Your self-employment does not have to be a licensed business for your business or activity to qualify as self-employment. Some examples of self-employment include:

a. Childcare that requires a license under chapter 74.15 RCW;

b. Driving a taxi cab;

c. Farming/fishing;

d. Odd jobs such as mowing lawns, house painting, gutter cleaning, or car care;

e. Running a lodging for roomers or boarders. Roomer income includes money paid to you for shelter costs by someone not in your assistance unit who lives with you when:

I. You own or are buying your residence; or

II. You rent all or a part of your residence and the total rent you charge all others in your home is more than your total rent.

f. Running an adult family home;

g. Providing services such as a massage therapist or a professional escort;

h. Retainer fees to reserve a bed for a foster child;

i. Selling items you make or items that are supplied to you;

j. Selling or donating your own biological products such as providing blood or reproductive material for profit;

k. Working as an independent contractor; and

l. Running a business or trade either on your own or in a partnership.

5. For medical programs, we do not count receipt of money by a member of a federally- recognized tribe from exercising federally protected rights or extraction of exempt resources as self-employment income (such as fishing, shell-fishing, or selling timber from protected tribal land). We count this as conversion of a resource. See WAC 388-450-0040.

6. If you are an employee of a company or person who does the activities listed in subsection (2) above as a part of your job, we do not count the work you do as self-employment.

7. Self-employment income is counted as earned income as described in WAC 388-450-0030 except as described in subsection (8).

8. For cash assistance and Basic Food there are special rules about renting or leasing out property or real estate that you own.

a. We count the income you get as unearned income unless you spend at least twenty hours per week managing the property.

b. For TANF/SFA, we count the income as unearned income unless the use of the property is a part of your approved individual responsibility plan.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

Determining Self Employment Status

Self Employment Status Decision Tree

Business Structure Chart

EXAMPLE

Ron states he is a financial advisor and is paid on commission. To determine if Ron is self-employed, ask if he receives a W-2 (employee) or 1099 (self employed). If he just began working, ask the company he works for which tax document he will receive (W-2 or 1099) or if taxes and FICA will be deducted from his commission checks.

Clarifying Information

1. Child Care:

Child care providers that are subject to the licensing requirements under chapter 74.15 RCW are self-employed, even if they do not have a current license. Child day-care center operators and family home day-care providers are self-employed.
People who aren’t required to be licensed under state law to provide care are considered to have an employer/employee relationship with the parent of the child for whom they provide care. These unlicensed individual providers are considered to be employees.

EXAMPLE

Betty is an individual provider paid by Ms. Lee to provide care in the child's home. Betty is Ms. Lee's employee.

EXAMPLE

Mary watches several neighborhood children in her home after school. She is not licensed, but she receives $100 a month for each child that comes to her house for a few hours after school each day. Mary is subject to licensing requirements under chapter 74.15 RCW, regardless of whether she has obtained the required license, and Mary is self-employed.

EXAMPLE

Ted provides child care for Ms. Thomas, who has been approved for WCCC. Ted receives payments through SSPS and from Ms, Thomas for the remaining co-pay. Ted is an employee.

2. ADSA

The Aging and Disability Services Administration (ADSA) individual providers work at the direction and control of the person to whom they provide care as well as the state. Their hours and wages are set by the customer and the state. Also, they receive benefits and have representation. WAC 388-71-0505 requires COPES customers to establish an employer-employee relationship. COPES and other ADSA individual providers are employees.

3. Corporations:

People who own a corporation are not coded as self-employed. This is true even if the person is the sole investor in the business. Corporations are separate entities from their investors and employees. The person is considered an employee of a corporation, and may also have income from dividends related to any investment in the corporation. Any income received from the corporation other than wages must be coded as unearned income. This includes any payments made by the corporation for personal expenses (for example: mortgage payments, car insurance, household items). See Treatment of Income for information on budgeting income from dividends and regular earnings.

Corporations include S Corporations and can include Limited Liability Companies (LLC) if they are set up as corporate structures. Partnerships are not incorporated, and are considered self-employment enterprises. For more information on various business structures, visit the IRS website.

4. WorkFirst:

For more information about how self-employment affects the WorkFirst participation of TANF / SFA clients, see the WorkFirst Handbook, Section 8.2. Self-Employment.