Slide Number #1 Slide #1 © 2008 Nan McKay & Associates Annie Stevenson Annual Income Inclusions ©...

Slide Number #1

Slide #1 © 2008 Nan McKay & Associates

Annie Stevenson

Annual Income Inclusions

© 2008 Nan McKay & Associates

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Today’s Topics:Income Inclusions

Annual income• Whose income counts?• “Imminent changes” in income

Earned Income• Seasonal• Military

Unearned Income• Imputed welfare income

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Annual Income

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Annual Income All amounts, monetary or not:

• On behalf of the family• Anticipated over the next 12 months• Not excluded in 24 CFR 5.609(c)• Includes amounts derived from assets to

which family has access

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Whose Income Counts? Head, spouse, other adults – all sources of

income not specifically excluded by regulations Full-time student – first $480 of employment

income Children under 18 – unearned income (such as

SS, SSI, TANF)

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Temporarily Absent Members

Include income of temporarily absent family membersPHAs should have policy for permanently and temporarily absent

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Family Members Temporarily/Permanently AbsentHCV Guidebook: a family member permanently confined to a nursing home is no longer a household member

• Income would not be counted• Allowances would not be given

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Computing Annual Income

Total/Gross Income - Exclusions = Annual Income

Formula

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PHAs are now required to show ALL excluded income on the HUD 50058

5400 4920 480

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PHAs must convert all income to an annual figure

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Converting Income

Convert wages to an annual incomeMultiply hourly wages by the number of hours worked per year (2080 for full-time)

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Converting Income Multiply weekly wages by 52 Multiply bi-weekly wages by 26 Multiply semi-monthly wages by 24 Multiply monthly wages by 12

X =

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Rounding

Round down if less than 50 cents• $6.29 x 2080=$13,083.20 = $13,083

Round up if 50 cents or more• $6.31 x 2080 = $13,124.80 = $13,125

Only enter whole dollar amounts on 50058

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Anticipating Annual Income Use current circumstances to anticipate annual

income unless:• An imminent change in circumstances is

expected (HCV GB)• It’s not feasible to anticipate a level of income

over 12 month period• PHA believes that past income is the best

available indicator of expected future income

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Example of Imminent Change Expected

Employer reports a full-time employee receiving $5.75 per hour will receive this for 7 weeks

In the 8th week after the effective date of the reexam, the employee will begin to receive $6.00 per hour

How is annual income calculated?

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Example of Imminent Change Expected

$5.75 x 40 hours x 7 weeks = $ 1,610 PLUS$6.00 x 40 hours x 45 weeks =$10,800

Total: $12,410

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Annual Income

Employment income• prior to payroll deductions• includes overtime, commissions, fees,

tips, and bonuses

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Seasonal Employment People in some occupations regularly work less

than 12 months per year• School employees• Agricultural workers• Construction trades

HUD’s RHiiP training materials describe 2 acceptable calculation methods

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Seasonal Employment

Method 1: Annualize current income• Conduct interim reexam when income

changes

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Seasonal Employment

Method 2: Calculate anticipated income from all known sources for the entire year• No interim reexam• History of income from past years is needed

• Not useful when future income source is “unknown” or “none”

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Seasonal Employment: Example

Maggie Price is currently employed as a tile setter in construction, earning $1,200 per month

For the last 3 years, she has worked this job for 8 months per year during the construction season

During the other 4 months of each year, she works part-time, earning $500 per month

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Calculation: Sample Method 1

Multiply current income ($1,200/month) times 12 months

$14,400 per year When the construction season ends, conduct an

interim reexam• Part-time income ($500/month) times 12 months $6,000 per year

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Calculation: Method 2 Calculate anticipated income from all known

sources for the entire year• Construction:

$1,200 x 8 months = $ 9,600• Part time income

$ 500 x 4 months = +$ 2,000• TOTAL: $ 11,600

NOTE: No interim reexam when the job changes

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Incorrect Calculation of Method 1

If the PHA counted only the current income ($1,200/month) times the anticipated length of the job (8 months), annual income would be calculated as $9,600• Family would pay less than TTP required by

regulations• Common error

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Seasonal Employment

PHA needs a written policy for this situation• Policy could lay out both scenarios,

project income under both methods, and let the family decide which method to select

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Seasonal Employment

If the PHA/family selects Method 1, the family should know that an interim reexamination will be conducted

If the PHA/family selects Method 2, the family should know that an interim reexamination will not be conducted

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Income of Dependents: Definition of Dependent

A family member:• under 18 years of age, or • with a disability, or• full-time student

• Doesn’t include head, spouse, co-head, live-in aide, foster child, or foster adult

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Income of Minors

Earned income of minors is NOT included, but . . .

Include any benefits or other non-earned income paid directly to minors

What would these be?

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Income of Full Time Students

Count the first $480 of earned income of adult full-time students (other than the head, spouse or co-head)• Discussion Question: How does HUD define a

F/T student? • 24 CFR 5.603

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Examples of Calculation

Other Income $3,500Employ FTS + 480Annual Inc $3,980

Dependent - 480

Adjusted Inc $3,500

RIGHT

Other Income $3,500Employ FTS 0Annual Inc $3,500

Dependent - 480

Adjusted Inc $3,020

WRONG

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Employment income = $4,000, other family income = $3,500

Full-Time Student Income on the 50058

3,500 3,5004,000 3,520 480

3,980

3,980

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Income of College Students

PHAs must include regular contributions• Support from parents

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Student Rule: HCV Only

Financial aid exceeding amounts received for tuition shall be included in annual income• However, financial aid paid to a student over

the age of 23 with dependent children is excluded

• Does not include student loans

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Student Rule: HCV Only

The final rule does not apply to students residing with their parents and receiving or applying for HCV assistance• Therefore, any financial assistance of a

student residing with parents is excluded

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Income from Assets

Assets can generate income

Income from assets is counted in determining Annual Income

Lunch ‘n’ Learn session on calculating income from assets: March 7, 2008

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Military Pay

Count all regular pay, special pay and allowances of member in armed forces

Do not count special duty pay received for being exposed to hostile fire

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Military Pay

Special pay and allowances do not appear on every paystub

In order to correctly calculate military pay, request Leave and Earnings Statement (LES) from military branch

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Gifts and Contributions

Count regular contributions made to the familyWould include the regular payment of a utility billDon’t count sporadic income such as birthday presents

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Gifts and Contributions

Temporary, nonrecurring, or sporadic income (including gifts) is not included in annual income

Sporadic income is income that is neither reliable nor periodic

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Periodic Payments and Allowances

Periodic payments• Social Security (gross - prior to Medicare deduction)

• If benefits reduced to make up for prior overpayments by SS, include amount provided, not amount that would have been provided if no error had been made

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Example of Social Security Reduction

Member received $1,100 per month for the past 6 months

Should have received only $1,000 per mo

SSA adjusts to recoup overpayment = $900 per month, for the next 6 months

How should this be annualized?• $900 x 6 months PLUS $1000 x 6 months

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Periodic Paymentsand Allowances

• Annuities• Insurance policies• Pensions• Disability• Death benefits

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Withdrawal from Investments as Income

Payments to family from investments is included in income• Except to the extent the withdrawal is

reimbursement of family’s own investment• Must be documented

• And, a lump sum distribution would not be income

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Withdrawal from Investment as Income

Example: When family member retires, amount received from retirement plan is not counted as income until family has received payments equal to amount deposited in retirement fund

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Example of Withdrawal from Investment

David Dow purchased an annuity many years ago. Now that he is retired, he is receiving monthly payments of $650

When he purchased his annuity, he paid $75,000

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The payments he receives from the annuity should not be counted as income until he has received payments for the full $75,000 invested

He has received $6500 from the annuity and will not receive the full $75,000 for another 8.8 years

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How long will the annuity payments not be counted as income?

Answer: 8 years (but ask at every reexam)

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Alimony and child support• Policy Issue: PHA may state in Admin Plan that

they will count amounts awarded as part of divorce or court agreement unless PHA verifies that payments are not being made

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• Example: Family member:• certifies income is not provided, and• has made effort to collect awarded

amounts• Address in policy when there is no court-

ordered award for alimony or child support

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Lump-Sum PaymentsIncome

• processing delays of periodic payments such as welfare or unemployment

Assets, not Income• SSI and SSA• inheritances• insurance payments such

as worker’s comp• capital gains• settlements for personal

and property losses

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Lump-sum Payment Policies Optional Policies:

• Attorney fees may be deducted when:• Attorney fees incurred to recover wrongful reduction or denial

of income• Court award does not include attorney fees

• Because the tenant is not actually receiving the entire amount

• Is using a portion to pay the fees

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Lump-sum Payment Policies

Deducting Fees

• Does NOT apply when not related to pursuing periodic payments the tenants feels they are eligible for

• Withholding child support, alimony, creditor dollars

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Lump-sum Payment Policies

• 2 acceptable calculation methods for lump sums that count as income• Prospective and retrospective

• See HCV Guidebook, p. 5-23 & 5-24

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Income From a Business

Includes self-employment• Count net: gross income minus expenses• Expenses may include depreciation (straight-line)

and interest payments on loans• Expenses do not include expansion or capital

improvements

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Income from a Business

Any withdrawal of cash or assets from the operation of a business or profession will be included in income• Except to the extent the withdrawal is

reimbursement of cash or assets invested in the operation by the family

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Income from a Business Mary has none of her cash invested in the business, but

she takes out $200 per month to live on

• Is this a business expense? • No

• Where is it included in her income?• In net income - it wasn’t subtracted out as an

expense

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Monthly Self-Employment WorksheetReporting for the Month of __________

Date Income Amount Date Expense Amount

TOTAL Monthly Income: TOTAL Monthly Expense:

Net Amount: $ ____________

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Public Assistance

Temporary Assistance for Needy Families

SSI

General Assistance

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Public Assistance Incomein As-Paid States

Welfare assistance payment designates specific amount for shelter and utilities

Special calculation of welfare income for ‘Welfare Rent’ recipients

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Specified Welfare Benefit Reductions

Situation: • Family is receiving welfare benefits• Receipt of the benefits are conditioned under

Federal, State or local law by the family’s participation in an economic self-sufficiency program

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• The family has not complied with certain requirements of the welfare agency and the family’s benefits have been sanctioned – reduced “in whole or in part”

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When the welfare agency imposes a sanction that reduces a family's welfare income because • The family commits fraud or • Fails to comply with welfare's economic self-

sufficiency program or work activities requirement…

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The PHA must also sanction the family by not reducing their rent, even though their income has been reduced

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The PHA must include in annual income an "imputed" welfare income

The imputed income is the amount the family would have received if the family had not been sanctioned

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Not applicable if welfare reduction is:• result of expiration of a time limit on receiving

benefits• family has complied with

requirements but can’t find a job• due to noncompliance with other welfare

agency requirements

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PHA counts imputed welfare income after receiving notice of benefit reduction from welfare agency

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Specified Welfare Benefits Reductions

Welfare agency, at request of PHA, will inform PHA of:• amount and term welfare benefit reduction for

family• reason for reduction• subsequent changes in term or amount of

reduction

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PHA will include Imputed Welfare Income in annual income determination• A family is receiving $500/mo TANF benefits.• Benefits stop due to welfare fraud.

• Imputed Welfare Income = $500

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Specified Welfare Benefits Reductions

Imputed Welfare Income is offset by additional income from other sources starting after sanctions imposed

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Imputed Welfare Income

A family is receiving $500/mo TANF benefits. Benefits stop due to welfare fraud

• Imputed Welfare Income = $500

The head begins working, earning $200/mo. • Employment income = $200• Imputed Welfare Income = $300

Total 50058 monthly income = $500

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Imputed Welfare Income A family is receiving $500/mo TANF benefits. Benefits are reduced to $200 due to fraud

• TANF income = $200• Imputed Welfare Income = $300

The head begins working, earning $200/mo.• TANF income = $200• Employment income = $200• Imputed Welfare Income?

• $300 - $200 = $100• Total 50058 Income = $500

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Imputed Welfare Income

A family is receiving $500/mo TANF benefits Benefits stop due to failing to participate in required

economic self-sufficiency program• Imputed Welfare Income = $500

The head begins working, earning $800/mo.• Employment income = $800• Imputed welfare income? $ 0

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Welfare Benefit Reductions

Family must be assisted at the time of the sanction, or no imputed welfare income is included in annual income

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Welfare Benefit Reductions

Family may request an informal hearing from PHA to review determination of imputed welfare income amount• but not whether they should have been

sanctioned by the welfare agency!

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Calculation Example Betty Childs family:

• TANF $650/month before sanction• No other income• Sanctioned due to fraud, verified by TANF agency• TANF reduced to $350/month for 12 months

We will walk through 3 scenarios with 50058 entries

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Calculation Example Scenario 1

• Calculate the imputed welfare income and total annual income for the family

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Scenario 1 Answers

7,800

7,800

Betty 1 350 x 12 4,200 4,200

Betty 1 IW 300 x 12

T

3,600 3,600

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• 3 months later, Ms. Childs starts receiving $150/month in alimony payments

• TANF benefits do not change• Calculate imputed welfare income and total

annual income for the family

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Scenario 2 Answers

7,800

7,800

Betty 1

Betty 1

Betty 1

T 350 x 12 4,200 4,200N 150 x 12 1,800 1,800

IW 150 x 12 1,8001,800

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• 6 months later, Ms. Childs gets a job earning $500/month

• TANF benefits and alimony do not change• Calculate imputed welfare income and total

annual income for the family

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Learning Activity 2-5 Answers

12,000

12,000

Betty 1

Betty 1

T 350 x 12 4,200 4,200

N 150 x 12 1,800 1,800

Betty 1 W 500 x 12 6,000 6,000

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Payments in Lieu of Earnings

• Unemployment• Workers compensation• Severance pay

PHA may figure for entire year when income for other weeks

is not known

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NMA Lunch ‘n’ Learn Seminar

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