Arkansas Administrative Code
Agency 016 - DEPARTMENT OF HUMAN SERVICES
Division 20 - Division of County Operations
Rule 016.20.00-006 - TEA Policy 2272 - Resources to be Disregarded, Policy 2341 - Earned Income to be Disregarded, Policy 2344 - Computation of Earnings from Self-Employment, Policy 3223.2 - Micro-Enterprise Escrow Account
Current through Register Vol. 49, No. 9, September, 2024
3223 Micro-enterprise (Self-Employment)
Definition/Purpose
The Micro-enterprise activity is designed to allow individuals to engage In self-employment enterprises. It may include individuals who are already self-employed, those wanting to expand a self-employment enterprise, and those expressing an interest in developing and starting a Micro-enterprise.
Micro-enterprise activities may include but are not limited to:
* receiving instructions on the development of a business plan;
* working in a self-employment business; or
* participating in a micro-lending program and associated activities.
A Micro-lending program is one that provides training, technical assistance and loan funds to low-income entrepreneurs to start or expand a business venture.
As part of the micro-enterprise program, individuals will be allowed to escrow profits into an escrow account (Refer to TEA policy 3223.2).
Discussion with Client
The Case Manager will discuss micro-enterprise activities with the recipient. If he or she indicates an interest in developing a business, the Case Manager will discuss the requirements of the program that will include the completion of a micro-enterprise assessment packet. During the assessment interview, the Case Manager will work with the client to determine his or her goals. The Case Manager will explain the availability of agencies in the area, which offer basic business skills training.
The Case Manager will assist the client in the completion of the assessment packet and, if appropriate, refer the client to a micro-lending agency or Small Business Administration (SBA). The Case Manager will also coordinate with the micro-lending agency or SBA for technical assistance with completion of the assessment packet.
Assessment Packet
Each county office will be responsible for coordinating with a local micro-lending agency or SBA to obtain or develop a micro-enterprise assessment packet to be completed by recipients interested in the micro-enterprise activity.
The assessment packet will include the following information;
[GREATER THAN] Business Summary - provides an overview of why the individual wants to enter into a business, the type of services or products the business provides and the goals and objectives that he or she may have for the business.
[GREATER THAN] Marketing Plan - identifies the area to be served, pricing and sales strategies and how the business will be promoted.
[GREATER THAN] Production Plan - identifies and describes how business products and services will be produced and made available to the customers.
[GREATER THAN] Financial Summary - is an overview of the projected cost for operating a business (e.g. cash flow, start-up costs, etc.) to achieve a profit.
[GREATER THAN] Narrative - summarizes the individual's goals and objectives and explains why he or she is committed to making a success in the business venture.
The recipient must complete the assessment packet to participate in a micro-enterprise activity. The Case Manager will assist the client in the completion of the packet. If determined appropriate, the client will be referred to a local micro-lending agency or SBA. (Refer to TEA 3223.1)
If an individual is engaged in Micro-enterprise activities for at least the minimum number of hours as required in TEA policy 3201, the activity in and of Itself will meet the work activity participation requirements.
Supportive Services are available if needed for individuals who are engaged in Micro-enterprise activities. This may include the purchase of start-up supplies if no other funds are available.
3223.1 Coordinating witti Micro-lending Programs
The County will determine what micro-lending agencies are available in the area (e.g. Good Faith Fund). Contact will be made to those agencies and coordination procedures developed for the referral of clients to the organizations. The location of the sites should be easily accessible to clients. In counties in which there are no accessible micro-enterprise development organizations, contact will be made with the Small Business Administration for coordination and referral procedures..
A referral will be made via form DHS-3350 and any other documents as determined through coordination with the micro-lending agency. The worker will make a referral to the agency that is believed to best suit the needs of the client.
3223.2 Escrow Account
The maximum amount of funds deposited into an escrow account that can be disregarded as a resource is $10,000.00.
A TEA recipient may escrow profits from his or her business, which are not reinvested into the business, into a micro-enterprise escrow account. The funds placed in the escrow account will not count when computing the monthly gross self-employment income.
In addition, a TEA recipient will not lose any transitional or extended support services available to him or her for the life of the escrow account.
The purpose of the escrow account is to allow the individual to set aside a percent of his or her profits for future use (e.g. expand business, update equipment, make repairs, etc.).
The amount an individual places in an escrow account should be determined on a case by case basis. The amount deposited should not affect his or her ability to meet daily living expenses.
NOTE: At any time there is a question as to whether a particular type of property or payment may be disregarded unde'r Item #10 above, the worker should submit the pertinent documents or information concerning the property or payment to the Office of Program Planning and Development, Slot 1220 for a determination. This information should include the specific federal or state statute under which it is believed the disregarded treatment is required.
2340 Earned income
Earned income includes wages, salaries, tips, commissions, and any other payment resulting from labor or personal service. Generally, if the person is working as an employee, PICA taxes are withheld from earned income.. Earned income also includes income from self-employment.
Most earned Income is considered in determining a family's TEA eligibility. However, in certain situations that are specified in the following section, earnings are not counted.
2341 Earned Income to be Disregarded
Earned income received in the following situations is not counted in determining the family's TEA eligibility:
NOTE: OJT and Subsidized Employment wages are not counted for income eligibility in relation to the Income Eligibility Standard. However, such earnings are considered for purposes of determining whether the payment will be the full amount or the 50% amount. (See TEA 2360.)
2344 Computation of Earnings from Seif-Employment
Like employee earnings, the monthly amount of self-employment earnings which must be considered is the agency's best estimate of earned income which will be available to the individual in a month or months. Costs directly related to producing the income are subtracted from the self-employment gross. Only those costs without which the income could not be produced will be subtracted. Such costs do not include depreciation, personal business and entertainment expenses, personal transportation, purchase of capital equipment and payments on the principal of loans for capita! assets or durable goods.
Also, income deposited in a Micro-enterprise escrow account will be deducted from.the self-employment income prior to computing monthly gross earnings.
For room and board income, a standard $120 per roomer/boarder will be subtracted as the cost related to producing the income.
Self-employment earnings are usually not as predictable as employee earnings and are often received less frequently than monthly. Therefore, in most situations, a time period longer than two months should be used to determine average monthly self-employment earnings.
Income Received Less Frequently Than Monthly fQuarterlv. Annually. Etc.)
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 time rather than during the period in which the work is being performed.
The first step in computing monthly gross earnings in these situations is to calculate the gross annual income for the previous calendar year. 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. The annual allowable costs are subtracted from the gross annual income. The remainder is then divided by 12 to arrive at an average monthly amount. This figure is treated gross earned income.
EXAMPLE: After expenses, Ms. Smith earns $1200 annually from farming. This amount prorated over 12 months equals $100/month. Therefore, $100 gross earnings would be considered for TEA purposes.
