410-1    Sources of Earned Income

 

Sources of earned income include (but are not limited to):

  1. Wages and salaries.  This includes sick and vacation pay which is paid by the employer. Wage advances are counted as income when received, not when the paycheck is received showing a deduction for the advance.

  2. Commissions.

  3. Tips as reported by the individual.  Do not count allocated tips as income.  The allocated amount is the amount reported by the employer to IRS based on gross receipts of the business.

  4. Training incentive payments and work allowances.

  5. Profits received from self-employment, including earnings over a period of time for which payment is received at one given time.  Examples include the sale of farm crops, livestock, and poultry raised for sale or bought for resale.  (See Section 401-2  for information about forms of business;  and Section 410-2 for information about determining countable self-employment income.)

  6. Capital gains received from the sale or transfer of assets used in self-employment.  This included gains received from the sale of (a) farmland or depreciable farm equipment; (b) livestock held for breeding, sport, or dairy purposes; (c) securities; (d) real estate; or (e) other investment property.

  7. Rental Income if the client manages the property.  The number of hours spent managing the property is not a factor.  If the property is managed by someone other than the individual, the income is unearned (See Section 402-9).

  8. Severance Pay.  Severance pay, including the cash out of holiday, vacation, and sick pay, counts as a lump sum in the month received.  (See Section 411, on how to count lump sum income).

  9. Temporary disability insurance or temporary workers' compensation payments which are employer funded, AND made to an individual who remains employed during recuperation from a temporary illness or injury pending the employee’s return to the job.

If the person does not maintain employee status, and/or the payments are not employer funded, the payments are considered to be unearned income.