01.02.04 - Income Calculation

Effective Date: 09/01/03

Revisions: 07/01/15; 11/01/17; 08/03/20, 08/30/23, 07/1/24
Reference:  89 Ill. Adm. Code, Chapter IV, §50.235

Policy Statement:

A family is considered "income eligible" when the combined gross monthly base income (earned and unearned) of all family members is at or below the Maximum Monthly Income Levels for the corresponding family size. In 2 parent families, both incomes must be combined to determine eligibility. Two-parent families include those with 2 or more adults living in the home, such as the applicant and his or her spouse or parents of a common child in the home.  Documentation must be secured for all income and maintained in the family eligibility file prior to approval for child care payments.

Procedure:

1. Self-Employment Income Calculation
   Income eligibility for a self-employed client is based on net income. Net income is obtained from the Federal Income Tax Return (IRS1040)
   and all applicable schedules and attachments. Personal and business tax returns must be submitted. Refer to 01.03.02 for other acceptable documentation if the client has not been self-employed long enough to have filed taxes.
   1. Subtract from gross self-employment income any allowable business expense necessary and directly related to producing goods or services. Allowable self-employment expenses include, but are not limited to:
      1. Replacement of stock,
      2. Purchasing inventory,
      3. Space rental,
      4. Utilities,
      5. Advertising,
      6. Salaries for employees other than the client,
      7. Transportation expenses required for employment, and
      8. Interest on loans for capital assets or durable goods.
         Income reinvested in a business, except for the purchase of real estate, is an allowable business expense. This includes the purchase of capital equipment, payment on the principal of loans, and other expenses needed to produce goods and services.
         NOTE: Capital equipment is equipment needed to produce self-employment goods (e.g. a printing press, copy machines, farm machinery, tools, sewing machines, tractors, tow trucks, etc.).
         Do not allow the following items as self-employment business expenses:
         1. Depreciation,
         2. Obsolescence and/or similar losses in the operation of the business, or Net losses from previous tax years
         3. Work-related personal expenses such as transportation to and from work;
         4. Federal, state, and local income taxes;
         5. Entertainment;
         6. Meals, and
         7. Money set aside for retirement
   2. Review the self-employment documentation submitted for expenses that are not allowed. If these expenses are included on the federal income tax return and are shown as deductions, the ineligible amounts must be added to the income.
   3. Figure monthly income by dividing annual self-employment income by 12.
   4. If the expenses exceed the gross receipts, the self-employment income will be zero (-0-). Those additional expenses which exceed the gross receipts will not be subtracted from other income from wages or salaries in the household.
2. Gross Monthly Base Income Calculation:
   1. Gross Monthly Base Income is determined on a prospective basis. The calculation must take into account all earned (including Net Self-Employment, if applicable), and unearned income included in the non-exempt income list. Refer to 01.02.02.  Overtime, bonuses and incentives are not included in the gross monthly base income calculation. Paid sick and vacation time should are counted since they represent pay that the individual would have earned if they had been at work and did receive as part of their gross pay. 
   2. The Child Care Management System's (CCMS) Income Calculator (link provided at the bottom of the Income Information screen) provides fields to enter all income and frequency information need for the system to calculate total income to use for income eligibility determination and co-payment assessment.
   3. C. Collect the two acceptable pay stubs for each employed individual included in the family size. Earnings of the client's children are exempt (unless that child is the applicant or second parent). If the applicant has not been employed long enough to receive two acceptable pay stubs, refer to 01.03.02 for other acceptable income documentation, and the definition of acceptable pay stubs
   4. Add the gross base wages or salary from the two acceptable pay stubs submitted. Divide the result by 2.  (Gross Base Wages and Salary = Hourly Rate x Number of Hours Worked + Commission(if on both stubs)  + tips)
      A simplified example for a single parent home, paid weekly, w/ one job:
      * Pay Stub #1 Reports 32 hours worked for Pay Period Jan 5 -Jan 9, hourly rate is $9.25
      * Pay Stub #2 Reports 40 hours worked for Pay Period Jan 12- Jan 16, hourly rate is $9.25
      * ($9.25 x 32 = $296.00) + ($9.25 x 40 = $370.00) =Total Gross Base Wages
         and Salary from both Pay Stubs  $666.00
      * $666.00/2 Average Gross Base Wages and Salary = $333.00
      Income received on salary, rather than an hourly wage, is counted at the expected monthly salary rate.
   5. Determine if the individual is paid weekly, bi-weekly, semi-monthly (twice monthly), or monthly. When the pay frequency is not spelled out on the payroll checks, use the Pay Frequency Calculator to determine the pay frequency or use the table below
      1. The most accurate way to determine the pay frequency is to use the pay begin and end date from the pay period.
      2. Use the pay dates only when the pay period information was not provided. The checks, however, must be consecutive in order to utilize this method.
      3. In rare instances, both methods above should be utilized.

Note: Seek further clarification when there is a discrepancy. A Request for Additional Information may be sent out only if necessary.

  F.  Convert the result in 'B' (Average Gross Base Wages and Salary), above to Monthly Gross Base Wages and Salary.

Add Total Additional Monthly Unearned Income to the  Monthly Gross Base Wages and Salary calculated in 'D' above.  Refer 01.02.02

3. Add all other non-exempt earned and unearned income from individuals included in the family size to the Monthly Gross Base Wages and Salary calculated in 'D' above.
   1. Any unearned non-exempt income received by individuals who are not the client's children included in the family size, regardless of age, is counted towards total family income.
   2.  B. If commission appears on both stubs of a client's income, count commission in the client's income
4. Deduct monthly child support paid out of the family's income. The result will be the family's Combined Gross Monthly Base Income.