Income Calculation

Created on: 
May 10 2016

Table of Contents

Related WACs and Clarifying Information

Working Connections Child Care

Seasonal Child Care

DEL Clarifying Information (published February 1, 2017)

WAC 170-290-0060

Irregular Pay Check

If a consumer receives a bonus or an irregular paycheck that is expected to occur only once in the calendar year, it is treated as a lump sum.

Children’s SSI

When a child receives SSI income, the following conditions must apply for the income to be used in determining the family’s eligibility:

  • The child must reside with the representative payee that administers the monthly disability SSI benefits.

  • Do not count any past-due SSI lump-sum payments in the WCCC household income.

Working under the Table.

If the activity meets the definition of employment or work, as described in WAC 170-290-0003, the income would be considered countable income for the household. We do not monitor if the income has been or will be reported to the IRS nor taxes paid.

WAC 170-290-0070

Excluded Income

Do not count income from:

  • A third-party child care copayment made directly to the provider.

  • SSI overpayments that are withheld from gross SSI income.

  • Earned income of siblings enrolled in high school or GED completion, or of siblings participating in a public special education program, until age 22.

Additional Information

Does the Department count gross or net income?

The Department counts gross income—that is, income before taxes and deductions.

What income is counted?

You may refer to WAC 170-290-0060 for WCCC or 170-290-3610 for SCC to view countable sources of income. 

What type of income is not counted?

You may refer to WAC 170-290-0070 for WCCC or 170-290-3630 for SCC for disregarded income.

Money withheld for repayment

If clients have money withheld from benefits to recover an overpayment from the same income source, this income is excluded from the gross benefit. Under these circumstances, we only count the net benefit amount.

How does the Department count loans?

Loans are not included when calculating monthly income.

What are allowable deductions?

Court-ordered child support income is deducted from total household income. If a client is paying support directly to the client through an informal agreement, however, this is not counted as a deduction. Bills and other expenses (except self-employment expenses) are not counted as deductions.

How does the Department verify income?

Click here to learn more about verifying income.

How does the Department calculate income?

When estimating future monthly income the Department looks at the number of hours worked per week, pay frequency and pay dates.  Income amounts are rounded to the nearest dollar for each source of income.

Scenario: John Smith works 40 hours per week at $10 per hour.

  • Multiply expected weekly income by 4.3 for clients paid once a week.
    • When using rate of pay and hours per week: 40 hours x $10 per hour = $400 per week x 4.3 weeks per month = $1720 per month.
    • When using wage stubs: Add all the gross amounts together, divide by the number of pay periods,  and then multiply by 4.3. See below.
  • Multiply expected income by 2.15 for clients paid every two weeks.
    • When using rate of pay and hours per week: 40 hours x 2 weeks = 80 hours per pay period x $10 per hour = $800 per pay period x 2.15 pay periods per month = $1720 per month.
    • When using wage stubs: Add all the gross amounts together, divide by the number of wage stubs, and then multiply by 2.15.
  • Multiply semi-monthly income by 2 for clients paid twice a month.
    • When using rate of pay and hours per week: 40 hours x 52 weeks / 24 pay periods = 86.67 hours per pay period x $10 per hour = $866.67 per pay period x 2 = $1733.33 per month.
    • When using wage stubs: Add all the gross amounts together, divide by the number of wage stubs, and then multiply by 2.
  • Use monthly income for clients paid once per month.
    • When using rate of pay and hours per week: 40 hours x 52 weeks / 12 pay periods = 173.33 hours per pay period x $10 per hour = $1733.33 per month.
    • When using wage stubs: Add all the gross amounts together and divide by the number of wage stubs.
  • If using a tax return, divide the gross yearly income from the tax return by the number of months worked that year. See below for more information on using W-2s and tax returns.
  • For self-employment: Clients may either itemize or use the standard $100.00 deduction. 
  • For clients receiving commission or overtime pay in addition to an hourly/monthly wage, the Department must determine if the commission or overtime pay will be on-going, and if the amount will vary due to seasonality of the industry.

When some wage stubs are higher or lower than others

For existing employment: When a client provides wage stubs, the Department determines how long it took to earn the income, and then divides that income by the same amount of time to determine an average monthly amount. This means that for existing employment all wage stubs are counted, both high and low.

Example 1: A client completes their eligibility review and provides wages stubs for the past three months. One of them is lower than the others:

$798.00 $715.00 $550.00
$836.00 $792.00 $722.00
 

The lower wage stub appears to be isolated and is not questionable. Therefore, we include all the wage stubs when determining eligibility and copayment.

Example 2: A client completes their eligibility review and provides wage stubs for the past three months. The most recent one is higher than the others:

$1205.00 $715.00 $805.00
$836.00 $792.00 $722.00
 

Because the most recent wage stub is significantly higher than the others additional questions will be asked.  Did the client receive a raise? Was it a bonus? Have their hours increased? If the wage stub itself does not show the reason for the difference -e.g.. it does not show the client’s hourly wage or have a separate line for bonuses - effort will be made to clarify the increase by questioning the client or calling the employer. If it is verified that the client received a pay raise, the Department will use the higher wage stub and estimate future earnings. The lower wage stubs will not be used because they do not accurately reflect future earnings. If the client received a bonus, the income might be treated as a lump sum (see below).

For new or changed employment: The client’s pay history may not accurately estimate their future income. Partial paychecks are not counted, and the Department makes the best possible estimate using the information provided to estimate future income.  Eligibility workers will not average wage stubs that do not accurately reflect future earnings.

Example 3: A client applies for child care and provides four wage stubs which show that they are paid every other week and that they started their job less than three months ago. The first check is lower than the rest:

$805.00 $756.00
$836.00 $325.00
 

Because the first wage stub is much lower than the others, and is most likely a partial wage stub, it is not counted when calculating future income and determining eligibility and copayment. The average of the other three stubs is an accurate estimate of what the client is likely to earn in the future.

When the client has bonus pay in addition to an hourly/monthly wage

Bonuses will be calculated depending on how often they are received.

  • Bonuses paid on a monthly schedule are treated like ongoing wages/salary. They are applied to normal monthly income.
  • Bonuses received on a time schedule other than monthly are treated as a lump sum payment (see below).

What is the lump sum process?

If a client receives a lump sum payment (such as money from the sale of property or a back child support payment) in the month of application or during the eligibility period, divide the lump sum payment by twelve to come up with a monthly amount. 

If adding the lump sum causes the household income to be more than 200% FPL the application will be denied.  If the lump sum is received after subsidy benefits have already been approved, the total monthly household income must be less than 85% State Median Income (SMI) to remain eligible. 

Note: If the lump sum is received on a regular basis other than yearly, divide the amount by a different number; e.g.. for a quarterly bonus, the payment is divided by three as it is received every three months.

To determine the monthly income from a lump sum payment take the following steps

  1. If a one-time payment, divide the total received by 12 to determine the monthly amount.
  2. Add the monthly amount to the expected average monthly income for the month it was received and the remaining months of the current eligibility period.
  3. Determine if the client is still eligible. The client must have monthly income under 200% FPL if in the month of application, or under 85% SMI if during the eligibility period after applying the lump sum. 

How does the Department use W-2s to calculate income?

Clients may provide tax returns and W-2s from the previous year as verification of income if they are currently working for the same employer as they were for entire previous year, or if they are doing similar work for the entire previous year and they expect that this year’s income will be similar to last year’s.

Example 4: A client worked at ABC Orchards last year, and is now working at 123 Orchards. Because the work is similar, this client can provide tax returns and W-2s from the previous year.
Example 5: A client worked at Sears last year, but this year is working at Amazon. This client cannot provide W-2s and tax returns to verify current income because the work is not similar.

When using tax returns and W-2s to calculate income, staff will divide the gross annual income by the amount of months it took to earn that income. If a client only works for six months in the year, the annual income will be divided by six months.

This method of verification is more common among clients working in seasonal agricultural work who are receiving Seasonal Child Care benefits. This is because of seasonal fluctuations in work where a client receives a lot of income in some months and doesn't receive very much in others. However, the requirements are the same for clients receiving Child Care Subsidy benefits.

How is income calculated when a client works variable hours?

If the Department receives verification from an employer that a client work a certain range of hours—e.g.. 35–40 hours per week—income is calculated using the average of that range; in this case, income would be calculated with 37.5 hours per week.

Can income be calculated from a year-to-date amount?

Yes. If clients are missing any wage stubs from the range that the Department has requested, they may provide as many as they are able to. Staff will determine how many wage stubs are missing with the paycheck dates and use the YTD amounts to determine the average pay on the missing stubs.

How is child support calculated?

When calculating child support, staff will typically use the Support Enforcement Management System, or SEMS. This is the system used by the Division of Child Support to manage their cases. The Department only calculates the child support clients are actually receiving, whether they are receiving less than their Monthly Ordered Amount or receiving more due to arrears. The Department also counts child support received through an informal agreement between a client and the other parent. Support provided in other forms, such as diapers, school supplies, and clothes, does not count as child support income.

Current payments

Current payments are the regular payments received every month. They are counted as income for the child(ren) for whom the support is paid.

Example 6: The court order is for $600 per month, but the client received $300 in June and July, $400 in August, and has received $200 so far in September (current month). September is not included in the average because it is not a complete month and it is possible that the client will receive additional child support. Instead, staff will use the income received in June, July, and August to determine the average monthly income [$300 (June) + $300 (July) + $400 (August) = $1000. $1000 / 3 months = $333.33/month].

Arrears

Arrears are past-due child support that is owed to the client. The payments are counted as income to the custodial parent instead of the child. The amount of arrears to budget is calculated the same way as current child support payments. However, if there are no more arrears owed on a case, previous arrears are not counted.

Example 7: Using Example 6 above, but the client has also received $50 in arrears in June, $65 in July, $30 in August, and $20 so far in September. $50 + $65 + $30 = $145, divided by 3 = $48.33/month average arrears.
Example 8: Using Example 7 above, but the client is not owed any more arrears. Staff disregard the previous arrears income as it is not reflective of future income.

What is not counted

The Department does not count the following as child support income:

  • Child support being held to fund a client’s TANF grant.
  • Any arrears being paid back by the other parent to the Department instead of the client.

Child support paid out

Court-ordered child support being paid by a client is counted as a deduction. This may be verified by using SEMS or the deductions on a client’s wage stubs. Child support paid directly to the other parent is not counted as a deduction.

 

How is income received from a corporation counted?

People who run their business out of a corporation are not considered 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.

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.

How is Strikers' income used?

Strikers are considered employed if they receive striker pay while they on strike. They are eligible for childcare while on strike.

How is Community Jobs income calculated?

If the client has not indicated they have started receiving income and there is no income budgeted in ACES, the Department will not pend cases for verification of income. Often, parents who enter Community Jobs do not get matched with a job site immediately.

How is new seasonal employment income calculated?

Sometimes an employer's written statement is received for new seasonal employment and the employer uses anticipated hours for seasonal work.

If a client reports that the hours vary due to weather or other seasonal crop variables, the Department uses the client’s estimate of anticipated income and work schedule.