PH and HCV Rent Calculation

Transcription

1 PH and HCV Rent Calculation Oklahoma NAHRO February 2010 Nan McKay & Associates, Inc Gillespie Way, El Cajon, CA

2 Copyright 2010 by Nan McKay & Associates, except for reference materials. All rights reserved.

3 Oklahoma NAHRO PH & HCV Rent Calculation Samantha Pratter Today s Topics Annual income inclusions Annual income exclusions Tomorrow s Topics Earned income disallowance Calculating income from assets Allowances and deductions Rent Refinement Final Rule Improving verification procedures Copyright 2010 Nan McKay and Associates, Inc. Page 1

4 Annual Income 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) Temporarily Absent Members Include income of temporarily absent family members PHAs should have policy for permanently and temporarily absent Copyright 2010 Nan McKay and Associates, Inc. Page 2

5 Family Members Temporarily/Permanently Absent HCV 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 Computing Annual Income Formula Total/Gross income - Exclusions = Annual income Computing Annual Income PHAs are required to show ALL excluded income on the HUD ,400 4, Copyright 2010 Nan McKay and Associates, Inc. Page 3

6 Computing Annual Income PHAs must convert all income to an annual figure 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 = Rounding Round down if less than 50 cents $6.29 x 2080=$13, = $13,083 Round up if 50 cents or more $6.31 x 2080 = $13, = $13,125 Only enter whole dollar amounts on Copyright 2010 Nan McKay and Associates, Inc. Page 4

7 Learning Activity 1 Annualizing income Family Name: Scott Head: Wages $5.65/hour (40 hrs/week) Spouse: Social Security $350/month Annual Income Learning Activity 1 Family Name: Tilden Head: Alimony $150 semi-monthly Head: Unemployment $125 weekly Annual Income Family Name: Wahl Head: Pension $175/month F-T Student, 19: Wages $5.75/hour (20hrs/week) Annual Income 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 Copyright 2010 Nan McKay and Associates, Inc. Page 5

8 Example of Imminent Change Expected Employer reports a full-time employee receiving $5.85 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? Example of Imminent Change Expected $5.85 x 40 hours x 7 weeks = $ 1,638 PLUS $6.00 x 40 hours x 45 weeks = $10,800 $12,438 Computing Annual Income Employment income prior to payroll deductions includes overtime, commissions, fees, tips, and bonuses Copyright 2010 Nan McKay and Associates, Inc. Page 6

9 Seasonal Employment People in some occupations regularly work less than 12 months per year School employees Agricultural workers Construction trades HUD s HCV Guidebook describes 2 acceptable calculation methods Seasonal Employment Method 1: Annualize current income Conduct interim reexam when income changes 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 Copyright 2010 Nan McKay and Associates, Inc. Page 7

10 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 Calculation: Sample Method 1 Multiply current income ($1200/month) times 12 months When the construction season ends, conduct an interim reexam Multiply income from part-time job ($500/month) times 12 months 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 Copyright 2010 Nan McKay and Associates, Inc. Page 8

11 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 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 Seasonal Employment If the PHA/family selects Method 1, the family should know that an interim reexamination will be conducted Method 2, the family should know that an interim reexamination will not be conducted Copyright 2010 Nan McKay and Associates, Inc. Page 9

12 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? 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 full-time student? 24 CFR Full-Time Student Income on the Miriam Leslie, a full-time student, receives $3,500 in alimony annually. She also receives $4,000 in employment income annually. Miriam Leslie Miriam Leslie N W 3,500 3,500 4,000 3, ,980 3,980 Copyright 2010 Nan McKay and Associates, Inc. Page 10

13 Income of College Students Include regular contributions in annual income such as financial support from parents Income of College Students Federal Register Rule effective Applies to HCV only HUD has issued a guidance notice (April 10, 2006) and Q&A s (May 2, 2006) Rule also impacts eligibility of college students for HCV assistance Income of College Students 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 Students living with parents are not affected Copyright 2010 Nan McKay and Associates, Inc. Page 11

14 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 Regular Gifts and Contributions Count regular contributions made to the family Would include the regular payment of a utility bill Don t count sporadic gifts such as birthday presents 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 Copyright 2010 Nan McKay and Associates, Inc. Page 12

15 Example of Social Security Reduction Member received $1,200 per month for the past 6 months Should have received only $1,100 per mo SSA adjusts to recoup overpayment = $1,000 per month, for the next 6 months How should this be annualized? Annuities Periodic Payments and Allowances Insurance policies Pensions Disability Death benefits 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 provide documentation And, a lump sum distribution would not be income Copyright 2010 Nan McKay and Associates, Inc. Page 13

16 Withdrawal from Investment as Income Example: When a 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 Example of Withdrawal from Investment Mark Lee purchased an annuity many years ago. Now that he is retired, he is receiving monthly payments of $500. When he purchased his annuity, he paid $50,000. Example of Withdrawal from Investment The payments he receives from the annuity should not be counted as income until he has received payments for the full $50,000 invested He has received $10,000 from the annuity and will not receive the full $50,000 for another 6.7 years Copyright 2010 Nan McKay and Associates, Inc. Page 14

17 Example of Withdrawal from Investment How long will the annuity payments not be counted as income? Answer: 6 years (but ask at every reexam) Periodic Payments and Allowances Alimony and child support Policy Issue: PHA may state in ACOP that they will count amounts awarded as part of divorce or court agreement unless PHA verifies that payments are not being made Periodic Payments and Allowances 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 Copyright 2010 Nan McKay and Associates, Inc. Page 15

18 Learning Activity 2 Annualizing Income Carmen Maura works full-time in a hotel making $5.75 per hour Calculate her total income by completing section 7 of the form Copyright 2010 Nan McKay and Associates, Inc. Page 16

19 Calculation on 50058

20 Income Lump-Sum Payments Processing delays of periodic payments such as welfare or unemployment Lump-Sum Payments Assets, not Income SSI and SSA Inheritances Insurance payments such as worker s comp Capital gains Settlements for personal and property losses 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, but is using a portion to pay the fees Copyright 2010 Nan McKay and Associates, Inc. Page 18

21 Lump-sum Payment Policies Deducting Fees Does NOT apply when not related to pursuing periodic payments to which the family feels they are eligible Garnishments for child support, alimony, creditor dollars 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 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 Copyright 2010 Nan McKay and Associates, Inc. Page 19

22 Income from a Business Donna has none of her cash invested in the business, but she takes out $300 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 Monthly Self-Employment Worksheet Reporting for the Month of Date Income Amount Date Expense Amount TOTAL Monthly Income: TOTAL Monthly Expense: Net Amount: $ Public Assistance Temporary Assistance for Needy Families SSI General Assistance Copyright 2010 Nan McKay and Associates, Inc. Page 20

23 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 Specified Welfare Benefit Reductions The family has not complied with certain requirements of the welfare agency and the family s benefits have been sanctioned reduced Specified Welfare Benefit Reductions 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 Copyright 2010 Nan McKay and Associates, Inc. Page 21

24 Specified Welfare Benefit Reductions The PHA must also sanction the family by not reducing their rent, even though their income has been reduced Specified Welfare Benefit Reductions 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 Specified Welfare Benefit Reductions 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 Copyright 2010 Nan McKay and Associates, Inc. Page 22

25 Specified Welfare Benefits Reduction 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 Specified Welfare Benefit Reductions PHA will include imputed welfare income in annual income determination. A family is receiving $600/mo TANF benefits Benefits stop due to welfare fraud Imputed welfare income = Imputed Welfare Income Imputed Welfare Income is offset (reduced) by additional (new) income from other sources starting after sanctions imposed. ADDITIONAL INCOME IMPUTED WELFARE INCOME Copyright 2010 Nan McKay and Associates, Inc. Page 23

26 Imputed Welfare Income Example 1 A family is receiving $600/mo TANF benefits. Benefits stop due to welfare fraud. Imputed welfare income = The head begins working, earning $300/mo. Employment income = Imputed welfare income = Total monthly income = Imputed Welfare Income Example 2 A family is receiving $600/mo TANF benefits. Benefits are reduced to $200 due to fraud. TANF income = Imputed welfare income = The head begins working, earning $300/mo. TANF income = Employment income = Imputed welfare income? Total income = Imputed Welfare Income Example 3 A family is receiving $600/mo TANF benefits Benefits stop due to failing to participate in required economic self-sufficiency program. Imputed welfare income = The head begins working, earning $800/mo. Employment income = Imputed welfare income? Copyright 2010 Nan McKay and Associates, Inc. Page 24

27 Welfare Benefit Reductions Family must be assisted at the time of the sanction, or no imputed welfare income is included in annual income 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! Copyright 2010 Nan McKay and Associates, Inc. Page 25

28 Learning Activity - Imputed Welfare Income Learning Activity: Imputed Welfare Income Brenda Walsh and her three children currently receive TANF benefits. They do not have any other source of income. The welfare agency has notified you that Ms. Walsh s benefits are being reduced because of fraud. Ms. Walsh s regular TANF amount is $650 per month. Her TANF is being reduced to $350 per month, and the reduction is expected to last for the next 12 months. She continues to receive the reduced TANF benefits of $350 each month. Using section 7 of the 50058s on the following pages, calculate the Walsh family s total annual income (lines 7a through 7i) using the scenarios below. Copyright 2009 by Nan McKay & Associates Page 1 2/1/09

29 Head of household name Social Security Number Date modified (mm/dd/yyyy) 6. - Assets Scenario 1: Calculate the imputed welfare income and total income for the family. 6a. Family member name No. 6b. Type of asset 6c. Calculation (PHA use) 6d. Cash value of asset 6e. Anticipated Income $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6f, 6g. Column totals $ 6f. $ 6g. 6h. Passbook rate (written as decimal) 0. 6h. 6i. Imputed asset income: 6f X 6h (if 6f is $5,000 or less, put 0) $ 6i. 6j. Final asset income: larger of 6g or 6i $ 6j. 7. Income 7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7g. Column total $ 7g. 7h. Reserved Walsh Scenario 1 Calculations 7i. Total annual income: 6j + 7g $ 7i. 7b: Income Codes Wages: B = own business F = federal wage HA = PHA wage M = military pay W = other wage Welfare: G = general assistance IW = annual imputed welfare income T = TANF assistance SS/SSI/Pensions: P = pension S = SSI SS = Social Security Other Income Sources: C = child support E = medical reimbursement I = Indian trust/per capita N = other nonwage sources U = unemployment benefits Previous editions are obsolete 5 form HUD (6/2004) Page 2 2/1/09

30 Head of household name Social Security Number Date modified (mm/dd/yyyy) 6. - Assets Scenario 2: Three months later, Ms. Walsh starts receiving $150 a month in alimony. Her 6a. Family TANF member benefits name do not No. change. 6b. Type Calculate of 6c. Calculation the imputed (PHA use) welfare 6d. Cash income value of asset and 6e. total Anticipated annual asset income for the family. Income $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6f, 6g. Column totals $ 6f. $ 6g. 6h. Passbook rate (written as decimal) 0. 6h. 6i. Imputed asset income: 6f X 6h (if 6f is $5,000 or less, put 0) $ 6i. 6j. Final asset income: larger of 6g or 6i $ 6j. 7. Income 7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7g. Column total $ 7g. 7h. Reserved Walsh Scenario 2 Calculations 7i. Total annual income: 6j + 7g $ 7i. 7b: Income Codes Wages: B = own business F = federal wage HA = PHA wage M = military pay W = other wage Welfare: G = general assistance IW = annual imputed welfare income T = TANF assistance SS/SSI/Pensions: P = pension S = SSI SS = Social Security Other Income Sources: C = child support E = medical reimbursement I = Indian trust/per capita N = other nonwage sources U = unemployment benefits Previous editions are obsolete 5 form HUD (6/2004) Page 3 2/1/09

31 Head of household name Social Security Number Date modified (mm/dd/yyyy) 6. - Assets Scenario 3: Six months later, Ms. Walsh gets a job earning $500 monthly. She continues to 6a. Family receive member alimony name at $150 No. per 6b. Type month. of 6c. Her Calculation TANF (PHA benefits use) 6d. are Cash still value $350 of asset a month. 6e. Anticipated Calculate asset total annual income for the family. Income $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 6f, 6g. Column totals $ 6f. $ 6g. 6h. Passbook rate (written as decimal) 0. 6h. 6i. Imputed asset income: 6f X 6h (if 6f is $5,000 or less, put 0) $ 6i. 6j. Final asset income: larger of 6g or 6i $ 6j. 7. Income 7a. Family member name No. 7b. Income Code 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 7g. Column total $ 7g. 7h. Reserved Walsh Scenario 3 Calculations 7i. Total annual income: 6j + 7g $ 7i. 7b: Income Codes Wages: B = own business F = federal wage HA = PHA wage M = military pay W = other wage Welfare: G = general assistance IW = annual imputed welfare income T = TANF assistance SS/SSI/Pensions: P = pension S = SSI SS = Social Security Other Income Sources: C = child support E = medical reimbursement I = Indian trust/per capita N = other nonwage sources U = unemployment benefits Previous editions are obsolete 5 form HUD (6/2004) Page 4 2/1/09

32 Payments in Lieu of Earnings Unemployment Workers compensation Severance pay PHA may figure for entire year when income for other weeks is not known Copyright 2010 Nan McKay and Associates, Inc. Page 30

33 Annual Income Exclusions Foster children and foster adults Foster children and foster adults are considered members of the household not the family Payments that the family receives for those foster children and adults is to be excluded from annual income Live-in aide income Live-in aides are also considered part of the household not the family Their income is excluded as is that of any dependents of a live-in aide living in the unit Copyright 2010 Nan McKay and Associates, Inc. Page 31

34 Lump-sum additions to family assets Lump sums are only added to assets if they are retained and verifiable, otherwise they are excluded Medical Reimbursements Exclude amounts received for reimbursement of medical expenses ex: from insurance companies or public assistance Income Exclusions New! Exclusion for guardianship care payments May be called Kin-GAP Kin-GAP and similar payments excluded as the equivalent of foster care payments, this includes Kinship Care Notice PIH and New guidance, code these children as foster children on the Copyright 2010 Nan McKay and Associates, Inc. Page 32

35 Income Exclusions New! Exclusion for deferred VA disability benefits Issued in a lump sum or in prospective monthly amounts Only the deferred benefits are excluded FR Notice 11/24/08 Financial Aid All financial aid is excluded in Public Housing Financial aid paid to a student over the age of 23 with dependent children is excluded (HCV) Only applies to students not living with their parents Therefore, exclude full amount of financial aid for students living with parents Student loans are excluded Income Exclusions Resident Service Stipends Received by a resident for performing a service for an owner Fire patrol Hall monitoring Lawn maintenance Serving on PHA board Resident initiatives coordinator Copyright 2010 Nan McKay and Associates, Inc. Page 33

36 Income Exclusions Resident Service Stipends Not to exceed $200 per month Resident cannot receive more than one such stipend at the same time What is Sporadic Income? Temporary, nonrecurring, or sporadic income (including gifts) is not included in annual income Sporadic income is income that is neither reliable nor periodic Sporadic Income Example Joseph Frey receives Social Security Disability plus works as handyman occasionally Claims only worked a couple times last year (no documentation) Answer the three questions. Copyright 2010 Nan McKay and Associates, Inc. Page 34

37 Answer: Sporadic Income Does this fit description of sporadic income? How do you handle his working income? Answer: Sporadic Income What type of documentation should the PHA have in Joseph s file to support its decision? Learning Activity 4 Peggy Sue receives child support and occasionally cleans houses for extra money She says she only worked a few times last year and she has no documentation Is Peggy Sue s cleaning income sporadic? Copyright 2010 Nan McKay and Associates, Inc. Page 35

38 Learning Activity 4 If we are anticipating that Peggy Sue will make $4800 in child support this year and she estimates that she earned $300 last year from house cleaning how do we record that on the 50058? Copyright 2010 Nan McKay and Associates, Inc. Page 36

39 Calculation on 50058

40 Sporadic Income HUD says sporadic income is neither reliable nor periodic It can be difficult to distinguish between sporadic income and periodic gifts and contributions Periodic gifts and contributions are included in annual income and sporadic income is not PHAs ACOP and Admin plans should have definitions of each according to policy Zero Income Checklist One way to keep track of sporadic income and family expenditures is the zero income checklist This checklist can be found in the PH Occupancy guidebook Appendix VIII An Example of Zero Income on the There are also times when families may have income that is used to meet household expenses which is entirely excluded, making them a zero income family Ex: The Smith family Joe Smith- head- 42 years old Food stamps: $200 a month Bobby Smith- son-15 years old Wages from paper route: $100 a week Copyright 2010 Nan McKay and Associates, Inc. Page 38

41 Zero Income on the Joe Smith 1 G $200 x Bobby Smith 2 W $100 x Sporadic Income New! Exclusion for temporary employment income from US Census Bureau No longer than 180 days Classified as sporadic income Notice PIH Income Exclusions Adoption assistance payments in excess of $480 per adopted child Developmental Disability Care Payments family member with developmental disability enables family to offset cost necessary to keep member at home Copyright 2010 Nan McKay and Associates, Inc. Page 39

42 Income Exclusions Refunds and Rebates for Property Taxes Under State/local law PASS income (SSI recipients - training program) Disregarded while SSI disregards it Holocaust Reparation Payments Income Exclusions Other Publicly Assisted Programs Amounts specifically for reimbursement of out-of-pocket expenses to allow participation in a specific program Income Exclusions Training Program Income HUD-Funded Training Program Exclude all amounts received under the training program while they are in the program Copyright 2010 Nan McKay and Associates, Inc. Page 40

43 Income Exclusions Training Program Income 5.609(c)(8)(v) Exclude all incremental earnings and benefits resulting from participation in a qualifying State or local employment training program Includes programs not affiliated with a local government No specific programs cited Income Exclusions Training Program Income Incremental income: Increase in total amount of benefits and earnings of family member prior to enrollment in training program versus after enrollment PIH 98-2 states welfare and earnings Income Exclusions Training Program Income 5.609(c)(8)(v) Exclude incremental earnings and benefits only while the family member participates in the employment training program Copyright 2010 Nan McKay and Associates, Inc. Page 41

44 Income Exclusions Training Program Income Definition of training program for 5.609(c)(8)(v) income exclusion: Clearly defined goals and objectives Income Exclusions Training Program Income Defining Training Program, PIH 98-2 states the program Generally has a variety of components, taking place over a period of time Is designed to enhance ability to become employed May have performance standards to measure proficiency Income Exclusions Training Program Income Training may include, but is not limited to Occupational classroom training Subsidized on-the-job training Basic education PIH 98-2 Copyright 2010 Nan McKay and Associates, Inc. Page 42

45 Income Exclusions Training Program Income Economic self-sufficiency programs can include: Job training Apprenticeship Employment counseling Work placement Basic skills training Education Training Program Income (c)(8)(v) A family head receives $600 per month in TANF. He then enrolls in a qualified State employment training program and receives $750 per month in training income. TANF benefits stop. What income is counted? How long will income be excluded? Training Program Income A family head receives $400 a month in child support. She enrolls in a state training program and receives $600 a month. Her child support continues. What income is counted? How long will it be excluded? Copyright 2010 Nan McKay and Associates, Inc. Page 43

46 Federally Mandated Income Exclusions Food stamps Domestic Volunteers Act HEAP Payments JTPA/Workforce Investment Act of 1998 Tribal Settlements Title IV of Higher Education Act Spina bifida Federally-Mandated Income Exclusions Any allowance paid under the provisions of 38 U.S.C to a child suffering from spina bifida who is the child of a Vietnam Vet Agent Orange Settlements Child Care and Development Block Grant Act Federally-Mandated Income Exclusions Earned Income Tax Credit Refunds Title V of the Older Americans Act Senior Community Service in Employment Program Examples in the book Crime Victim Compensation Copyright 2010 Nan McKay and Associates, Inc. Page 44

47 PIH Federally-Mandated Income Exclusions Medicare Prescription Drug Plan Permanent program Replaces temporary/transitional MMA assistance Low-income subsidy assistance Paid to low-income Medicare beneficiaries to assist in paying Medicare prescription drug plan costs FAQ 1 Q: A 17 year old receiving home schooling is employed full time. How is the employment income treated for this 17 year old home schooled student? FAQ 1 A: The income must be excluded per 5.609(c)(1) which states annual income does not include income from employment of children under the age of 18 Copyright 2010 Nan McKay and Associates, Inc. Page 45

48 FAQ 2 Q: If a family receives income that by definition is excluded from annual income should the PHA record that amount on the 50058? FAQ 2 A: Yes, the family should report and the PHA should record all amounts of income the family receives the per the instruction booklet FAQ 3 Q: According to 24 CFR (c)(11) earnings in excess of $480 for full time students 18 or older (excluding head, spouse or co-head) are excluded from annual income. Is there an age limit on a full time student? Copyright 2010 Nan McKay and Associates, Inc. Page 46

49 FAQ 3 A: No, a full time student is a person attending school full time, as defined by the institution, per 24 CFR there is no maximum age FAQ 4 Q: What is considered temporary or sporadic income? FAQ 4 A: The regulation 24 CFR (c)(9) does not define temporary or sporadic income. Therefore, PHAs must determine what is considered temporary or sporadic income and define it in their policies. Generally amounts that are neither reliable or periodic are considered sporadic Copyright 2010 Nan McKay and Associates, Inc. Page 47

50 FAQ 5 Q: Will HUD require verification of the amount of income that is excluded? FAQ 5 A: Yes. In accordance with 24 CFR (2)(i) PHAs must obtain adequate documentation to reasonably determine the excluded amount of income, if necessary to determine whether that income would be excluded. Depending on the circumstances any or all of the following would need to be verified: source, circumstances that qualify family for exclusion and amount of exclusion Questions & Answers Copyright 2010 Nan McKay and Associates, Inc. Page 48

51 Earned Income Disallowance PH: 24 CFR Effective 10/01/99 Final rule Effective date 4/28/00 HCV: 24 CFR Effective 4/20/01 Technical amendments 2/13/02 Earned Income Disallowance PH and HCV earned income disallowance regulations are similar, except: HCV EID only applies to family members with disabilities PH EID is not restricted to persons with disabilities Earned Income Disallowance EID excludes increases in earned income from: New employment Increased earnings Copyright 2010 Nan McKay and Associates, Inc. Page 49

52 EID Qualifications To qualify for the EID, a family must be receiving assistance under the HCV/PH program Applicant families are not eligible for the EID Family must experience an increase in total annual income as a result of one of the following reasons... Qualifications 1. Employment by a (HCV: disabled) family member who Was previously unemployed * for one or more years prior to employment * Definition includes a person who has earned not more than could be earned working 10 hrs/week, 50 wks/year, at established minimum wage or Qualifications 2. Increased earnings by a (HCV: disabled) family member: Whose increased earnings occurred during member s participation in an: Economic self-sufficiency program Job-training program Copyright 2010 Nan McKay and Associates, Inc. Page 50

53 HUD Definition of Economic Self-Sufficiency Program Any program designed to encourage, assist, train or facilitate economic independence of assisted families or to provide work for such families HUD Definition of Economic Self-Sufficiency Program Economic self-sufficiency programs can include: Job training English proficiency Employment Workfare counseling Financial or household mgmt Work placement Apprenticeship Basic skills training Activity necessary for work Education OR... EID Qualifications 3. New employment or increased earnings by a (HCV: disabled) family member who has received TANF benefits or services within past 6 months No minimum amount if TANF is received in form of monthly maintenance If TANF is received in form of one-time payments, wage subsidies, or transportation assistance, total received over 6 month period must be at least $500 Copyright 2010 Nan McKay and Associates, Inc. Page 51

54 Determining the Incremental Increase Determine the annual income of the EIDqualified person prior to the qualifying change (earned and/or unearned) Calculate the annual income of the EID-qualified person after the qualifying change The difference is the incremental increase Example #1 Alice Brahm had $6000 in TANF benefits at the time she became employed. She is earning $13,600 at her new job, and her TANF benefits have stopped How much is the incremental increase? Example 1: Think it Through TANF $6000 Empl $ 0 Total $6000 TANF $ 0 Empl $13,600 Total $13,600 Did we exclude all of her earned income? How much did we exclude? Why didn t we exclude the $13,600? Copyright 2010 Nan McKay and Associates, Inc. Page 52

55 Example #2 Art Baker had no income at the time he became employed at $9800 per year. How much is the incremental increase? Example 2: Think it Through Other Inc $ 0 Empl $ 0 Total $ 0 Other Inc $ 0 Empl $9800 Total $9800 How much did we exclude? Did we exclude all of his earned income? Why? EID Initial 12-Month Exclusion During initial 12 month exclusion period: Exclude the full amount of increase in income attributable to employment or increased earnings Copyright 2010 Nan McKay and Associates, Inc. Page 53

56 EID Initial 12-Month Exclusion Initial full exclusion period begins on date qualified family member is: employed; or first experiences increase in income due to employment Initial full exclusion extends for a total of 12 cumulative months (don t have to be consecutive months) EID Second 12-Month Exclusion and Phase-In Exclusion is 50% of any increase attributable to employment or increased earnings EID Second 12-Month Exclusion and Phase-In Second 12-month exclusion period begins after qualified family member has received 12 cumulative months of full exclusion Phase-in period extends for a total of 12 cumulative months (don t have to be consecutive months) Copyright 2010 Nan McKay and Associates, Inc. Page 54

57 EID Maximum 4 Year Disallowance 4 year lifetime maximum disallowance period Starts at beginning of initial exclusion period and ends exactly 48 months later No exclusion may be given after this lifetime limit has been reached EID Maximum 4 Year Disallowance EID regulations call for a maximum of 12 cumulative months for each of the two exclusion periods Thus, an individual can max out after receiving the EID for only two years 12 consecutive full exclusion months followed by 12 consecutive phase-in exclusion months EID Issues Tracking can be complex In an ideal world, a person who qualifies for the EID will receive: The full exclusion for 12 consecutive months The phase-in exclusion for the next 12 consecutive months Tracking would be easy Copyright 2010 Nan McKay and Associates, Inc. Page 55

58 In an Ideal World Count all income 100% of increase 50% of increase Tracking EID Issues In reality, the exclusion may start and stop more than once, making it a challenge to figure out how much to disallow when there is a break during an exclusion period Reality may be months 6 months 9 months 100% 100% 50% 50% It s over Copyright 2010 Nan McKay and Associates, Inc. Page 56

59 Tracking EID Issues Or... The four-year maximum may be reached before the full 12 months of phase-in (or even initial full exclusion) have been used up Or.Reality may be months 3 months 2 months 100% 100% 50% It s over EID Issues Calculation of incremental increase May necessitate conducting interim reexams throughout phase-in period Regardless of PHA s interim policy To ensure that every participant who is eligible for EID receives it and is calculated properly, PHA must consider Copyright 2010 Nan McKay and Associates, Inc. Page 57

60 EID Issues How will you document what evidence will you provide: That the family is a qualified family? The income exclusion in the family s file? How will you track the number of months income has been excluded and when the exclusion must end? EID Issues Best source for answers: RHIIP FAQs: rhiip/faq.cfm EID FAQs: ao_faq.cfm Public Housing Only: Individual Savings Accounts If PHA puts into policy Instead of the disallowance, the family may elect to have the PHA deposit in an individual savings account an amount equal to the total amount that otherwise would have been excluded from annual income PHA releases for rule-specified reasons Copyright 2010 Nan McKay and Associates, Inc. Page 58

61 Earned Income Disallowance Learning Activity 5: Doria s EID Calculation Review the case study Part 1: Calculate the prequalifying income, the exclusion amount and wages for EID member Parts 2-4: Recalculate for changes Answers: Baseline Income Manny s prequalifying (baseline) income is: $ Copyright 2010 Nan McKay and Associates, Inc. Page 59

62 Learning Activity - Earned Income Disallowance Learning Activity: Task EID Calculation: Doria Family Calculate the amount of the EID family member s earnings to be included in annual income. Scenario At Manny Doria s annual reexamination, his annual income consisted of $4,500 from Social Security disability benefits. This has been his only income for the last two years. Part 1 Manny has just reported he has become employed, and the PHA has verified that he will now be earning $10,500 per year. He will continue receiving $4,500 a year from Social Security. - How much is Manny s prequalifying (baseline) income? (ALL income of EID family member prior to qualifying event.) Copyright 2009 by Nan McKay & Associates Page 1 2/1/09

63 Learning Activity - Earned Income Disallowance Step 1: Calculate EID family member s exclusion amount. A1. Earned income of EID family member $ A2. Earned income, if any, included in prequalifying income. $ A3. Increase in earned income (A1 A2). If 0 or negative, STOP. Do not exclude any earned income. B. Other income of EID family member (including income from assets) $ C. Total annual income of EID family member (A1 + B) $ D. Enter prequalifying income $ E. Full exclusion (C D, but no more than A3) $ F. 50% exclusion during phase-in period, if applicable (E 0.50) $ $ Step 2: Determine EID family member s wages after exclusion. G. EID family member s earnings (HUD-50058, 7d) $ H. Exclusion (E or F, as applicable) (HUD-50058, 7e) $ I. EID family member s earned income after exclusions (G H) HUD-50058, 7f) $ Form HUD a. Family member name No. 7b. Income code Manny 1 SS 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) Manny 1 W 7g. Column total Copyright 2009 by Nan McKay & Associates Page 2 2/1/09

64 Learning Activity - Earned Income Disallowance Part 2 Manny is still earning $10,500 annually, but his Social Security benefits have been reduced to $3,000. Step 1: Calculate EID family member s exclusion amount. A1. Earned income of EID family member $ A2. Earned income, if any, included in prequalifying income. $ A3. Increase in earned income (A1 A2). If 0 or negative, STOP. Do not exclude any earned income. B. Other income of EID family member (including income from assets) $ C. Total annual income of EID family member (A1 + B) $ D. Enter prequalifying income $ E. Full exclusion (C D, but no more than A3) $ F. 50% exclusion during phase-in period, if applicable (E 0.50) $ $ Step 2: Determine EID family member s wages after exclusion. G. EID family member s earnings (HUD-50058, 7d) $ H. Exclusion (E or F, as applicable) (HUD-50058, 7e) $ I. EID family member s earned income after exclusions (G H) HUD-50058, 7f) $ Form HUD a. Family member name No. 7b. Income code Manny 1 SS Manny 1 W 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) 7g. Column total Copyright 2009 by Nan McKay & Associates Page 3 2/1/09

65 Learning Activity - Earned Income Disallowance Part 3 Manny is now entering his phase-in period. His wages dropped to $10,000 annually, and his Social Security benefits have increased to $6,000. Step 1: Calculate EID family member s exclusion amount. A1. Earned income of EID family member $ A2. Earned income, if any, included in prequalifying income. $ A3. Increase in earned income (A1 A2). If 0 or negative, STOP. Do not exclude any earned income. B. Other income of EID family member (including income from assets) $ C. Total annual income of EID family member (A1 + B) $ D. Enter prequalifying income $ E. Full exclusion (C D, but no more than A3) $ F. 50% exclusion during phase-in period, if applicable (E 0.50) $ $ Step 2: Determine EID family member s wages after exclusion. G. EID family member s earnings (HUD-50058, 7d) $ H. Exclusion (E or F, as applicable) (HUD-50058, 7e) $ I. EID family member s earned income after exclusions (G H) HUD-50058, 7f) $ Form HUD a. Family member name No. 7b. Income code Manny 1 SS Manny 1 W 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) 7g. Column total Copyright 2009 by Nan McKay & Associates Page 4 2/1/09

66 Learning Activity - Earned Income Disallowance Part 4 Manny has been promoted! He is now earning $18,000 annually. His Social Security benefits remain at $6,000. Step 1: Calculate EID family member s exclusion amount. A1. Earned income of EID family member $ A2. Earned income, if any, included in prequalifying income. $ A3. Increase in earned income (A1 A2). If 0 or negative, STOP. Do not exclude any earned income. B. Other income of EID family member (including income from assets) $ C. Total annual income of EID family member (A1 + B) $ D. Enter prequalifying income $ E. Full exclusion (C D, but no more than A3) $ F. 50% exclusion during phase-in period, if applicable (E 0.50) $ $ Step 2: Determine EID family member s wages after exclusion. G. EID family member s earnings (HUD-50058, 7d) $ H. Exclusion (E or F, as applicable) (HUD-50058, 7e) $ I. EID family member s earned income after exclusions (G H) HUD-50058, 7f) $ Form HUD a. Family member name No. 7b. Income code Manny 1 SS Manny 1 W 7c. Calculation (PHA use) 7d. Dollars per year 7e. Income exclusions 7f. Income after exclusions (7d minus 7e) 7g. Column total Copyright 2009 by Nan McKay & Associates Page 5 2/1/09

67 Challenges for PHA Staff Manny: When my Social Security benefits dropped.my rent didn t! But when my Social Security benefits went up, you had no problem raising my rent! HUD FAQs Three websites for FAQs ao_faq.cfm (Admission & Occupancy) rhiip/faq_gird.cfm (RHIIP) rhiip/faq_ris.cfm (Rental Integrity Summit) EID FAQ #1 Must the member of a household who gets a job or increased earnings be the same member of the household who received TANF benefits? Copyright 2010 Nan McKay and Associates, Inc. Page 65

68 EID FAQ #1 Yes. Only members of a qualified family who are also TANF recipients can receive the disregard based on the qualifying factor related to new employment or an increase in income during or within six months of receipt of TANF EID FAQ #2 If a tenant is eligible for the earned income disregard, can the disregarded amounts be used in determining the cap for the childcare expense deduction? EID FAQ #2 In the case of childcare necessary to permit employment, the amount deducted shall not exceed the amount of employment income that is included in annual income; therefore, the disregarded amounts cannot be used in determining the cap for the childcare expense deduction. (24 CFR 5.603) Copyright 2010 Nan McKay and Associates, Inc. Page 66

69 EID FAQ #3 If a family was working, and then becomes unemployed, applies for TANF, receives TANF for one month and then becomes employed again, is the member entitled to the disregard? EID FAQ #3 Yes. The regulation states that a person is eligible if they have experienced employment during or within 6 months after receiving TANF assistance. This person is eligible for EID. EID FAQ #4 A sporadic wage earner begins work on the 16th day of the month, and then quits five days later, on the 21st. Since EID would typically go into effect on the first day of the month following the increase in annual income due to employment, does the participant lose one month of the disallowance? Or, does the "clock" ever start? Copyright 2010 Nan McKay and Associates, Inc. Page 67

70 EID FAQ #4 In this case, the EID should not be processed for the participant. The "clock" should not be started for this family member EID FAQ #5 If a PHA incorrectly determined the amount of the exclusion under EID, and therefore too much income was excluded, can the PHA collect the overpayment from the family? EID FAQ #5 If the PHA incorrectly determined the tenant's rent, as a result of PHA error, the PHA would be required to correct the tenant records and ensure accurate rent payment, prospectively. Tenants are not responsible for rent underpayments (PHA overpayments) due to PHA error. Copyright 2010 Nan McKay and Associates, Inc. Page 68

71 EID FAQ #6 What is the baseline income for an eligible family member who is earning $600 per month in a HUD funded training program (entire amount is excluded), and then gets a job while in the training program, earning $1,000 per month? EID FAQ #6 Since the family member's earnings under the HUD funded training program (24 CFR 5.609(c)(8)(i)) are excluded in the calculation of annual income, and the participant had no other income from wages or benefits, the baseline income is $0. Questions & Answers Copyright 2010 Nan McKay and Associates, Inc. Page 69

72 Calculating Income from Assets Assets and Asset Income PHA must identify and verify Assets Market value of asset Expenses involved to convert asset to cash Actual anticipated income from assets Assets and Asset Income Why are assets important for rent calculation? Annual income includes income from assets Therefore, assets may affect annual income PHAs must consider any asset that has a dollar value or provides any income Copyright 2010 Nan McKay and Associates, Inc. Page 70

73 Assets and Asset Income Assets may affect annual income Annual income includes income from assets What Assets Include Accessible amount of trusts available to family Distributed income is included in annual income If a trust is not revocable by, or under the control of, any family member it will not be considered an asset What Assets Include Stock, bonds, money market funds and other investment accounts Expenses to convert to cash may involve a brokers fee Income may be in the form of interest or dividends Copyright 2010 Nan McKay and Associates, Inc. Page 71

74 What Assets Include Equity in real property, other capital investments Equity = market value minus all loans (mortgage) secured by the asset Cash value = equity minus expenses to convert to cash What Assets Include Expenses to convert real property or other capital investments to cash may include: Broker fees Sales commissions Settlement costs Transfer taxes What Assets Include Retirement savings accounts such as IRAs and Keoghs Withdrawal would result in a penalty The penalty would be considered a cost in converting to cash Copyright 2010 Nan McKay and Associates, Inc. Page 72

75 What Assets Include Contributions to company retirement and pension funds Before retirement, count only amounts family can withdraw without retiring or quitting After retirement, count regular periodic payments as income What Assets Include Assets held in the name of more than one person that allow unrestricted access Count full value of the asset What Assets Include Lump sum additions to family assets, which are retained and verifiable Inheritances, capital gains, lottery winnings, insurance payments (including payments under health & accident insurance and worker s comp), settlements for personal or property losses Social security, deferred VA disability, and SSI lump sum payments Copyright 2010 Nan McKay and Associates, Inc. Page 73

76 What Assets Include Retained and verifiable means that the lump sum must be in a form that can be verified if retained. If the lump sum was not retained (spent or given away) it cannot be counted as an asset If the lump sum was placed in a savings account or other identifiable asset, it would be counted What Assets Include Do not count lump sums for deferred periodic payments as assets (except SS, SSI, VA) Such lump sums are counted as income SS, SSI, and deferred VA benefits lump sums are an exception and will be treated as an asset, if retained and verifiable If not retained and verifiable they are neither assets nor income What Assets Include Personal property held as investment Gems Jewelry Coin collections and other collectibles Antique cars To find market value, may need appraisal If so, at PHA s, not family s, expense Copyright 2010 Nan McKay and Associates, Inc. Page 74

77 What Assets Include Cash surrender value of life insurance policies Some life insurance will have a surrender value, and some won t The surrender value less penalties, if any, is the cash value Some life insurance policies pay dividends, some interest, and some both Assets and Asset Income An asset is an item of value that can be converted to cash The market value is the amount the asset is worth We must also find the cash value of each asset Assets and Asset Income Why do we need to know both the market and the cash value of an asset? Market value is used to determine the actual income from the asset and the cash value Cash value is used to determine the total cash value of all the family s assets in the HUD calculations Copyright 2010 Nan McKay and Associates, Inc. Page 75

78 Net Cash Value Net cash value of assets means: The value of an asset after deducting reasonable costs that would be incurred in converting the asset to cash Real property: broker fees, closing costs Certificate of deposit: penalty for early withdrawal Stocks: broker fees Savings accounts Net Cash Value Net cash value of assets Formula: Market value Expenses to convert to cash = Net cash value Net Cash Value Fred s CD has a $ 7,000 market value Early withdrawal penalty is $ 400 What is the cash value of this asset? Formula: Market value $ 7,000 - Expenses Net cash value $ 6,600 Copyright 2010 Nan McKay and Associates, Inc. Page 76

79 Actual Anticipated Income from Assets Assets can generate income Income from assets is counted in determining annual income Examples of income from assets Interest Dividends Actual Anticipated Income from Assets When an asset earns interest or dividends the formula is: Market value X Interest/dividend rate = Actual anticipated income Quiz Fred s CD has a $ 7,000 market value Early withdrawal penalty is $ 400 Fred will earn 4% interest on the CD The HUD passbook rate is 1.5% What is the actual anticipated income from this asset? A. $105 B. $264 C. $99 D. $280 Copyright 2010 Nan McKay and Associates, Inc. Page 77

80 Quiz Answer When an asset earns interest or dividends the formula is: $ 7,000 Market value X 4% Actual interest rate at bank = $ 280 Actual anticipated income Copyright 2010 Nan McKay and Associates, Inc. Page 78

81 Fred Section 6: Assets Market Value - Expenses = Cash value Market Value x interest/div = CD 7, ,

82 Income from Assets When net cash value of all assets is $5,000 or less, use the actual anticipated income from assets If net cash value of assets exceeds $5,000 must use the greater of: Actual anticipated income from assets Imputed income from assets (HUD passbook rate times net cash value of all assets) Imputed Asset Income Imputed asset income is based on the total cash value of all assets and the HUD passbook rate Formula: Total cash value x HUD passbook rate = Imputed asset income HUD Passbook Rate The HUD field office determines the passbook rate for the PHA locality Based on the average interest rate received on passbook savings accounts at several banks in the local area Disregard references to a standard 2% rate given in the PH Occupancy Guidebook Copyright 2010 Nan McKay and Associates, Inc. Page 80

83 Imputed Asset Income Imputed asset income is income that would be received from an asset if it were converted to cash and placed in a savings account earning a HUD-determined passbook rate Imputed Asset Income Do not apply the passbook rate to each individual asset with a cash value over $5000 (unless the family only has that one asset) Add the cash values of all assets together, before applying the HUD passbook rate Do not apply the passbook rate in lieu of actual asset income if the actual income is zero Copyright 2010 Nan McKay and Associates, Inc. Page 81

84 Fred Section 6: Assets MV EXP = Cash value MV x int/div = Anticipated inc CD 7, , ,

85 Calculating on the HUD John has a savings account with a current balance of $8000. He will earn 1.35% interest on the account. The HUD passbook rate is 1.55% PHA s policy is to use the current balance of savings accounts as the cash value Copyright 2010 Nan McKay and Associates, Inc. Page 83

86 Calculation on 50058

87 Calculating Cash Value Ellen has a house which has a market value of $125,000. She has an outstanding mortgage balance of $50,000. If she were to sell, she would pay a realtor $4,200 commission and closing costs of $800. How do we find the cash value? Calculating Cash Value Market value Less HUD asset expenses: Broker fee Legal fee Settlement costs Penalty for early withdrawal Less mortgage balance Cash value Assets Disposed of For Less Than Fair Market Value Imputed Assets: Assets disposed of within two years prior to examination or reexamination for less than fair market value Copyright 2010 Nan McKay and Associates, Inc. Page 85

88 Assets Disposed of For Less Than Fair Market Value Imputed cash value of an asset is the difference between the actual cash value of the asset and the amount received Example: Home market value = 225,000 - Fees incurred Actual cash value - 7, ,000 - Amount received Imputed cash value -150,000 68,000 Assets Disposed of For Less Than Fair Market Value In the previous example, had the family sold the property for $1.00, a greater cash value would be counted: Example: Home market value = $ 225,000 -Fees incurred Actual cash value - 7,000 $218,000 - Amount received - $1 Imputed cash value $217,999 Assets Disposed of For Less Than Fair Market Value Disposal of assets for less than market value is not limited to real property it includes any personal or business assets disposed of by the family Example: A mother gives her adult daughter, no longer living with her, $5000 cash out of her savings account Copyright 2010 Nan McKay and Associates, Inc. Page 86

89 Assets Disposed of For Less Than Fair Market Value PHAs can establish through policy a minimum threshold for counting assets disposed of for less than fair market value to avoid having to count small amounts such as gifts and charitable contributions Threshold of $1,000 would be reasonable Assets Disposed of For Less Than Fair Market Value Dispositions are not considered to be for less than fair market value if part of: Divorce or separation Bankruptcy Foreclosure PHA should develop applicant/tenant certification form for verification purposes Calculation of Imputed Assets Simon is disabled and could no longer maintain his home. Two months ago he sold his house to his son for $25,000, which he put in a savings account earning 1.25% interest. The son assumed the $22,000 mortgage. The house is appraised at $78,000. Realtor s commission was $4,680. HUD passbook rate is 1.5% Copyright 2010 Nan McKay and Associates, Inc. Page 87

90 Market value Less asset expenses: Broker fee Less mortgage balance Cash value Less amount received Imputed Asset Imputed asset value Copyright 2010 Nan McKay and Associates, Inc. Page 88

91 Calculation on 50058

92 Calculating Asset Cash Value and Asset Income on HUD Carly has a savings account valued at $900 with anticipated interest income of $11. She received an inheritance of $40,000. She used $20,000 of it to buy a car. The remaining $20,000 was put into stocks. If she were to sell the stock the broker fee would be $1,500. The stock is expected to earn a 1.75% dividend this year. The HUD passbook rate is 1.15%. Copyright 2010 Nan McKay and Associates, Inc. Page 90

93 Calculation on 50058

94 Income from a Rental Property It is possible for an assisted family to own real property and rent it out Income from such a rental would be reported as asset income on the (unless approached as a business) Only net rental income is reported Calculating Rental Income on Harold owns a home and rents it out. Market value is $125,000 Cash value is $70,000 Rental income is $675 per month Anticipates expenses (as per next slide) HUD Passbook rate is 1.4% Income from a Rental Property Rent $675/mo = $ Expenses: - Maintenance $10/wk = -Insurance $40/mo = -Taxes $175/half = - Interest on Mortgage $325/mo = -Utilities $50/quarter = TOTAL EXPENSES $ Net Rental Income $ Copyright 2010 Nan McKay and Associates, Inc. Page 92

95 Calculation on 50058

96 Assets Do Not Include Personal property (not held as investment) necessary items such as cars, clothing, furniture Assets Do Not Include Assets not accessible to the family such as irrevocable trusts Note that if a irrevocable trust pays a periodic payment it is treated as an income On the the income would come under Section 7 (income), coded as N, other nonwage sources Assets Do Not Include Interest in Indian trust land Assets which are part of a business such as products prepurchased with the intent to sell Equity accounts in HUD homeownership programs Value of homes being purchased with assistance under 24 CFR 982 Subpart M, Homeownership option Limited to first 10 yrs after purchase date of home Copyright 2010 Nan McKay and Associates, Inc. Page 94

97 Assets Do Not Include Family Self-Sufficiency (FSS) escrow accounts and Individual Savings Accounts (ISAs) held by the PHA for the family Do not count the income from interest accrued on these accounts Assets of live-in aides, foster children or foster adults Assets FAQ #1 Question: If a tenant puts $10,000 in an IRA, and 10 years later the IRA is worth $15,000 and the tenant begins withdrawing monthly amounts from the IRA, are the amounts withdrawn considered income? Assets FAQ #1 Answer: Withdrawals from an investment that are received as periodic payments are counted as income, unless the family can document that amounts withdrawn are reimbursement of amounts invested Withdrawals count as income after amount invested has been paid out Copyright 2010 Nan McKay and Associates, Inc. Page 95

98 Assets FAQ #2 Question: If 2 sisters are on the program, living separately, and have their names on each other s savings accounts, what balances are counted as assets for each sister? Assets FAQ #2 Answer: If both sisters have access to the balance of both accounts, count both accounts for each sister In this instance, the guidance in Handbook is not applicable Assets FAQ #2 Example: Account 1: $5000 Account 2: $3000 Count $8000 for EACH sister Copyright 2010 Nan McKay and Associates, Inc. Page 96

99 Questions & Answers Copyright 2010 Nan McKay and Associates, Inc. Page 97

100 Allowances and Deductions Adjusted Income Background Formula: Gross income Including asset income Minus exclusions Equals annual income First major building block in rent calculation Adjusted Income Introduction In this session: ADJUSTED INCOME Second major building block in rent calculation Copyright 2010 Nan McKay and Associates, Inc. Page 98

101 Adjusted Income Introduction Adjusted income is an error-prone component of rent calculation 25% of families paid at least $5 too much in rent Per 2001 quality control study Generally these families did not receive correct allowances and deductions Definitions Elderly family Disabled family Dependent Household vs. family Adjusted income Definition of Adjusted Income Total Annual Income minus allowances Dependents Elderly/disabled allowance Child care Medical expenses Disability expenses Copyright 2010 Nan McKay and Associates, Inc. Page 99

102 Dependent Allowance $480 for each dependent: Under 18 Person with a disability Full-time student Head, spouse, co-head, foster child or foster adult, live-in aide are never a dependent Common Errors: Dependent Allowance Remember that a dependent may be ANY family member who is disabled or a FT student Not head, spouse, live-in aide, etc. Could be brother, boyfriend, grandparent Not limited to adult child of head of household Elderly/Disability Allowance $400 per family where the head or spouse is at least 62 or disabled $400 is the maximum amount the family can receive, even if both head and spouse are elderly or disabled Copyright 2010 Nan McKay and Associates, Inc. Page 100

103 Child Care Allowance Includes reasonable child care expenses PHA determines what is reasonable Care provided for children under 13 years of age including foster children HUD Interpretation of Child Care Expenses A PHA may not disallow a deduction for child care expenses because there is an unemployed adult family member who may be available to provide the care A PHA may not decide who will provide child care for an applicant s or a participant s child(ren) HUD Interpretation of Child Care Expenses A PHA may not decide the type of child care available for a participant s child(ren) Citation: Verification Guidebook Copyright 2010 Nan McKay and Associates, Inc. Page 101

104 Child Care Expenses Care enables a family member to Work Actively seek work Attend school Child Care Expenses Costs may be higher in summer and during holidays Applicant should certify whether any costs are being reimbursed Child support payments don t qualify Child Care Expenses Child care allowance for work cannot exceed the income that a family member earns If more than one member working - which worker enabled by child care? Member works and attends school Prorate expense to compare with amount earned Copyright 2010 Nan McKay and Associates, Inc. Page 102

105 Learning Activity 6 Becky Walker s annual income is $14,621 All from employment Becky has three children, all under 13 years of age. She is paying a total of $60 per week for child care while she works Copyright 2010 Nan McKay and Associates, Inc. Page 103

106 8. Expected Income Per Year 8a. Total annual income: copy from 7i $ 8a. Permissible Deductions (Public Housing Only. If Section 8, Skip to 8f or 8q) 8b. Family member name No. 8c. Type of permissible deduction 8d. Amount $ $ $ $ $ $ 8e. Total permissible deductions (sum of column 8d) $ 8e. If head/spouse/co-head is under 62 and no family member is disabled, skip to 8q 8f. Medical/disability threshold: 8a X 0.03 $ 8f. 8g. Total annual unreimbursed disability assistance expense (if no disability expenses, skip to 8k) $ 8g. 8h. Maximum disability allowance: If 8g minus 8f is positive or zero, put amount $ 8h. If negative and head/spouse/co-head is under 62 and not $ 8h. disabled, put 0 If negative and head/spouse/co-head is elderly or $ 8h. disabled, copy from 8g 8i. Earnings in 7d made possible by disability assistance expense $ 8i. 8j. Allowable disability assistance expense: lower of 8h or 8i (if 8g is less than 8f and $ 8j. head/spouse/co-head elderly or disabled, copy from 8h) 8k. Total annual unreimbursed medical expenses (if head/spouse/co-head under 62 and not disabled, $ 8k. put 0) 8m. Total annual disability assistance and medical expense: 8j + 8k (if no disability expenses, copy from 8k) $ 8m. 8n. Medical/disability assistance allowance: If no disability assistance expenses or if 8g is less than 8f, put 8m minus 8f (if 8m minus 8f is negative, put zero) $ 8n. If disability assistance expenses and 8g is greater than or equal to 8f, copy from 8m $ 8n. 8p. Elderly/disability allowance (default = $400) $ 8p. 8q. Number of dependents (people under 18, or with disability, or full-time student. Do not count head $ 8q. of household, spouse, co-head, foster child/adult, or live-in aide.) 8r. Allowance per dependent (default = $480) $ 8r. 8s. Dependent allowance: 8q X 8r $ 8s. 8t. Total annual unreimbursed childcare costs $ 8t. 8x. Total allowances: 8e + 8n + 8p + 8s + 8t $ 8x. 8y. Adjusted annual income: 8a minus 8x (if 8x is larger, put 0) $ 8y.

107 Common Errors: Child Care Expenses Failure to consider costs for entire year for school-age children Allowing deduction for child over 12 May qualify as disability assistance if child is disabled Limiting deduction to child care for work Common Errors: Child Care Expenses Deducting full amount when family pays a portion of cost Request third-party verification of actual payments Allowance for Disability Assistance Expense Anticipated expenses for: Care attendants Auxiliary apparatus Wheelchairs, ramps, vehicle adaptations, special equipment for the blind, etc. Copyright 2010 Nan McKay and Associates, Inc. Page 105

108 Allowance for Disability Assistance Expense IF such expenses Enable a family member (could be person with the disability) to WORK Exceed 3% of annual income Don t exceed the earnings of person enabled to work Disability Assistance Expense If the disability assistance expense enables more than one person to be employed PHA must combine the income of those persons to determine the cap Allowance for Disability Assistance Expense Question: Must a family meet HUD s definition of a disabled family in order to qualify for disability assistance expenses? Copyright 2010 Nan McKay and Associates, Inc. Page 106

109 Disability Assistance Expense Disability assistance expense/child care If both child care and disability assistance expense are needed to enable a person in the family to work, The employment income used to justify the child care allowance may NOT also be used to justify disability assistance allowance Learning Activity 7 Family Name: Gilmore Head: 38 Earned Income: $ 11,000 Spouse: 32 Earned Income: $ 9,000 Son: 14 (with a disability) Disability assistance expense/year $ 4,600 enables spouse to work Copyright 2010 Nan McKay and Associates, Inc. Page 107

110 8. Expected Income Per Year 8a. Total annual income: copy from 7i $ 8a. Permissible Deductions (Public Housing Only. If Section 8, Skip to 8f or 8q) 8b. Family member name No. 8c. Type of permissible deduction 8d. Amount $ $ $ $ $ $ 8e. Total permissible deductions (sum of column 8d) $ 8e. If head/spouse/co-head is under 62 and no family member is disabled, skip to 8q 8f. Medical/disability threshold: 8a X 0.03 $ 8f. 8g. Total annual unreimbursed disability assistance expense (if no disability expenses, skip to 8k) $ 8g. 8h. Maximum disability allowance: If 8g minus 8f is positive or zero, put amount $ 8h. If negative and head/spouse/co-head is under 62 and not $ 8h. disabled, put 0 If negative and head/spouse/co-head is elderly or $ 8h. disabled, copy from 8g 8i. Earnings in 7d made possible by disability assistance expense $ 8i. 8j. Allowable disability assistance expense: lower of 8h or 8i (if 8g is less than 8f and $ 8j. head/spouse/co-head elderly or disabled, copy from 8h) 8k. Total annual unreimbursed medical expenses (if head/spouse/co-head under 62 and not disabled, $ 8k. put 0) 8m. Total annual disability assistance and medical expense: 8j + 8k (if no disability expenses, copy from 8k) $ 8m. 8n. Medical/disability assistance allowance: If no disability assistance expenses or if 8g is less than 8f, put 8m minus 8f (if 8m minus 8f is negative, put zero) $ 8n. If disability assistance expenses and 8g is greater than or equal to 8f, copy from 8m $ 8n. 8p. Elderly/disability allowance (default = $400) $ 8p. 8q. Number of dependents (people under 18, or with disability, or full-time student. Do not count head $ 8q. of household, spouse, co-head, foster child/adult, or live-in aide.) 8r. Allowance per dependent (default = $480) $ 8r. 8s. Dependent allowance: 8q X 8r $ 8s. 8t. Total annual unreimbursed childcare costs $ 8t. 8x. Total allowances: 8e + 8n + 8p + 8s + 8t $ 8x. 8y. Adjusted annual income: 8a minus 8x (if 8x is larger, put 0) $ 8y.

111 Common Errors: Disability Assistance Expense Medical expenses for a person with disabilities are often incorrectly coded as disability assistance Remember that this deduction is only applicable if it enables a family member to work Not seek work/attend school Medical Expenses Permitted ONLY for family where head, spouse or co-head is at least 62 or disabled If family eligible, medical expenses deducted for all family members Anticipate expenses to be incurred during 12 months following certification Example Head disabled 50 years old Son 16 Daughter 12 Daughter 1 Live-in attendant Whose anticipated medical expenses qualify? Copyright 2010 Nan McKay and Associates, Inc. Page 109

112 Allowable Medical Expenses PHA policy determines allowable medical expenses PHAs may use IRS Publication 502 as a tool Available at Typical Allowable Medical Expenses Professional services Services of health care facilities Prescription/nonprescription medicines Medical insurance premiums/co-payments (includes Medicare premiums) Typical Allowable Medical Expenses Live-in or periodic medical assistance Nursing services Costs for assistive animal and its care Long term care insurance premiums Copyright 2010 Nan McKay and Associates, Inc. Page 110

113 Typical Allowable Medical Expenses Transportation for treatment Dental expenses Eyeglasses, hearing aids Monthly payment on accumulated medical bills Medicare Prescription Drug Discounts and Assistance PIH Transitional assistance ended in May 2006 Under MMA s permanent plan, deduction is based on actual anticipated unreimbursed prescription costs Include Medicare prescription drug plan premium, if paid by family Medicare Prescription Drug Discounts and Assistance HUD-Medicare tip sheet medicare_prescriptiondrugcoverage.pdf Information for families Rent may increase with reduced Rx cost Family still benefits financially Copyright 2010 Nan McKay and Associates, Inc. Page 111

114 Medical Allowance Medical allowance portion of anticipated medical expenses that exceed 3% of Annual Income Learning Activity 8 Family name: Alden Head: 81 Spouse: 80 Annual income: $13,500 Learning Activity 8 Anticipated medical expenses: Health insurance premium- $55 monthly Eyeglasses $300 annually, each Doctor visits 4 times a year at $20 each visit Anticipated yearly prescription costs of $425 Balance due on a medical bill of $325 (Will be paying it off at $15 a month) Copyright 2010 Nan McKay and Associates, Inc. Page 112

115 Learning Activity 8 Anticipated medical expenses: Health insurance premium - $55 monthly Eyeglasses $300 annually, each Doctor visits 4 times a year at $20 each visit Learning Activity 8 Anticipated medical expenses: Anticipated yearly prescription costs of $425 Balance due on a medical bill of $325 (Will be paying it off at $15 a month) Learning Activity 8 Total anticipated medical expenses: Health Insurance premium - $ Eyeglasses - $ Doctor visits - $ Prescriptions - $ Medical bill - $ TOTAL $ Copyright 2010 Nan McKay and Associates, Inc. Page 113

116 8. Expected Income Per Year 8a. Total annual income: copy from 7i $ 8a. Permissible Deductions (Public Housing Only. If Section 8, Skip to 8f or 8q) 8b. Family member name No. 8c. Type of permissible deduction 8d. Amount $ $ $ $ $ $ 8e. Total permissible deductions (sum of column 8d) $ 8e. If head/spouse/co-head is under 62 and no family member is disabled, skip to 8q 8f. Medical/disability threshold: 8a X 0.03 $ 8f. 8g. Total annual unreimbursed disability assistance expense (if no disability expenses, skip to 8k) $ 8g. 8h. Maximum disability allowance: If 8g minus 8f is positive or zero, put amount $ 8h. If negative and head/spouse/co-head is under 62 and not $ 8h. disabled, put 0 If negative and head/spouse/co-head is elderly or $ 8h. disabled, copy from 8g 8i. Earnings in 7d made possible by disability assistance expense $ 8i. 8j. Allowable disability assistance expense: lower of 8h or 8i (if 8g is less than 8f and $ 8j. head/spouse/co-head elderly or disabled, copy from 8h) 8k. Total annual unreimbursed medical expenses (if head/spouse/co-head under 62 and not disabled, $ 8k. put 0) 8m. Total annual disability assistance and medical expense: 8j + 8k (if no disability expenses, copy from 8k) $ 8m. 8n. Medical/disability assistance allowance: If no disability assistance expenses or if 8g is less than 8f, put 8m minus 8f (if 8m minus 8f is negative, put zero) $ 8n. If disability assistance expenses and 8g is greater than or equal to 8f, copy from 8m $ 8n. 8p. Elderly/disability allowance (default = $400) $ 8p. 8q. Number of dependents (people under 18, or with disability, or full-time student. Do not count head $ 8q. of household, spouse, co-head, foster child/adult, or live-in aide.) 8r. Allowance per dependent (default = $480) $ 8r. 8s. Dependent allowance: 8q X 8r $ 8s. 8t. Total annual unreimbursed childcare costs $ 8t. 8x. Total allowances: 8e + 8n + 8p + 8s + 8t $ 8x. 8y. Adjusted annual income: 8a minus 8x (if 8x is larger, put 0) $ 8y.

117 Common Errors: Medical Expenses Counting the same expense twice Pharmacy printout and receipt Basing deduction on last year s total Including one-time expenses Limiting deduction to prescription costs Check application/reexam forms Common Errors: Medical Expenses Calculation for Medicare Part D Family s costs may have increased or decreased Omitting costs of insurance premiums May be shown on paystubs, pension award letters, etc. HUD FAQs Three websites for FAQs ao_faq.cfm (Admission & Occupancy) rhiip/faq_gird.cfm (RHIIP) rhiip/faq_ris.cfm (Rental Integrity Summit) Copyright 2010 Nan McKay and Associates, Inc. Page 115

118 Questions & Answers Refinement of Income and Rent Determination Requirements in Public and Assisted Housing Programs; Final Rule Federal Register Implementation date: Final Rule Background Final rule initially published in the Federal Register on covered these subjects: SSN disclosure Mandatory EIV usage Citizenship verification removed Income annualization removed Records retention Copyright 2010 Nan McKay and Associates, Inc. Page 116

119 Federal Register Rule status changed to proposed Several changes were made to the final rule published Two of the original provisions were removed Proposed implementation date changed to HUD Webcast Clarification and Guidance on Refinement of Income and Rent Final Rule Previous Webcast held on Webcast and training materials are archived HUD may address citizenship verification requirement changes in separate rulemaking SSN Disclosure Requirements Copyright 2010 Nan McKay and Associates, Inc. Page 117

120 SSN Requirements Applicants 24 CFR and All household members must disclose accurate and documented SSN at time of eligibility determination Does not apply to ineligible individuals in mixed families Household cannot be admitted until all required SSNs have been submitted and verified SSN Requirements Applicants 24 CFR and Failure to comply: If household is otherwise eligible, they may remain on the waiting list Eligible applicants in full compliance may move ahead of noncompliant applicants when assistance becomes available in accordance with PHA policy SSN Requirements Participants 24 CFR and Participants who are not age 62 and over by January 31, 2010, and who have not submitted a valid SSN, must submit a valid SSN at their next interim or reexam Participants who are 62 and over by January 31, 2010 are exempt from this requirement Copyright 2010 Nan McKay and Associates, Inc. Page 118

121 SSN Requirements Participants 24 CFR and New additions to a household who have an assigned SSN must provide valid SSN and documentation at time of initial request or at first interim or annual in which they are included Children under age six must now have a valid SSN SSN Requirements Participants 24 CFR and Participants have 90 calendar days to provide valid SSN and documentation when adding a child under age six who has no assigned SSN PHAs must grant a 90 day extension for failure to comply due to circumstances out of participant s control as determined by PHA SSN Requirements Participants 24 CFR and Failure to comply: Assistance of entire household must be terminated PHA has discretion to give a 90 day extension if: Noncompliance resulted from circumstances beyond the participant s control There is a reasonable likelihood the family will be able to disclose a SSN by the new deadline Copyright 2010 Nan McKay and Associates, Inc. Page 119

122 SSN Requirements Required documentation: SSN card, or Original document from a federal or state government agency showing name, SSN, other identifying info All SSNs are validated through PIC/EIV SSN Requirements So what is different? Children under 6 have to supply SSN (about 62K would be impacted) Participants age 62 or over as of 1/31/10 are exempt from the new requirements Mandatory EIV Usage Copyright 2010 Nan McKay and Associates, Inc. Page 120

123 EIV Usage New regulation at 24 CFR PHAs must use EIV as a third-party source during reexams Most PHAs already use EIV EIV Usage PHAs must use EIV in its entirety as a third-party source In its entirety includes using EIV reports, i.e. Deceased Tenant Report, Failed Verification Report, etc. Failure to use EIV may result in sanctions Records Retention Copyright 2010 Nan McKay and Associates, Inc. Page 121

124 Records Retention New requirement to retain forms, FSS, and supporting documentation Minimum of 3 years during each assisted lease and 3 years after EOP Paper or electronic To permit effective audit New Notice on Verification of SSNs and SS/SSI Benefits Notice PIH SSA Benefit Verification HUD s position is that SSA benefit verification letter (if dated w/in 60 days of PHA request for info or interview date) provided by family or an EIV Income Report is third party verification No additional verification is required PHAs should not submit requests to SSA to verify family is not receiving benefits Copyright 2010 Nan McKay and Associates, Inc. Page 122

125 Notice PIH SSA Benefit Verification If applicant family does not have SSA benefit letter dated w/in last 60 days do not send them to SSA office to get info Help family request Proof of Income Letter Online at: By phone at: SSA prefers online requests Notice PIH SSA Benefit Verification For tenant families PHA must use EIV to verify SS/SSI If family disputes EIV, and cannot provide current (w/in last 60 days) benefit letter, PHA must follow same process as with applicants Never use bank statements or copies of checks as verification Notice PIH SSA Benefit Verification The notice goes into detail regarding the calculation of income when there is an SSA overpayment deduction No rule changes here PHAs must use the EIV Identity Verification Report on a monthly basis Goes into detail about error messages and corrections no new news here Copyright 2010 Nan McKay and Associates, Inc. Page 123

126 Questions & Answers Verification Regulatory Verification Requirement The PHA must obtain and document in the family file third party verification of the following factors, or must document in the file why third party verification was not available: CFR (c) Reported family annual income The value of assets Expenses related to deductions from annual income Other factors that affect the determination of adjusted income Copyright 2010 Nan McKay and Associates, Inc. Page 124