130% of poverty level, keep getting denied CMSP (California low-income program)

Reply Sun 1 Sep, 2013 03:48 pm
I have an annual self-employment income of $13,497, which I proved using my tax returns. This is my only income. However, I have been denied CMSP coverage on the basis that I my "income is over 200% of the federal poverty level." (According to the 2013 Federal Poverty Level Guidelines, that would mean I was making over $22,980. That's a big difference! Does anyone know why my case workers are lumping so much extra money onto my income?

I have a joint business bank account with my business partner, under the name of the business, not my own name. I do not have access to anything but my $1250 monthly draw (which comes to $15,000 annually - around 130% of the poverty level, so still eligible limits --- the discrepancy is because my business was not actually making enough money last year to pay myself that amount).

Again, this is my ONLY income. There is other money in the account, such as accumulated sales and employment taxes, and money that we use to buy inventory and pay our employees. I was told by my first case worker that MY BUSINESS BANK ACCOUNT DOES ***NOT*** COUNT AS ASSETS OR INCOME. And yet I have been denied CMSP 3 times this year for being above income limits. How are they determining this?? See below for how business assets are treated:

"Exempt property: applicant’s home, clothing, one car, and certain other
things such as items necessary for self-employment (building, inventory, bank account) or used on the job (tools, second car, etc.)."

Every time I apply, I get sent a letter saying I was denied because my income is too high. I don't understand. $13,497 or $15,000, however they're calculating it, is NOT over 200% of the poverty level!

I have no stocks, bonds, retirement accounts, literally nothing else. I never have more than $2000 in my personal bank account (the one that legally they should be using to determine my assets). Where is this extra income determination possibly coming from?? Any case workers out there? Anyone have a similar problem? I'm about to re-apply for the FOURTH TIME THIS YEAR, because my doctor thinks I have inherited MS, but I can't afford treatment or the MRI.
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cicerone imposter
Reply Sun 1 Sep, 2013 03:56 pm
It seems you're not asking the right questions. You need to find out how they are calculating your income.
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Reply Sun 1 Sep, 2013 04:11 pm
Did the business show a profit last year? What kind of business is it in terms of business class (sole propriety, s-corp, c-corp, llc, etc)?

Look at Section 8-013 of the CSMP Eligibility Manual and see if they may be pulling business profits into the calculations.
Reply Sun 1 Sep, 2013 11:19 pm
The business is a general partnership and I'm a 50% partner. My share of the profit was the $13,000 stated earlier (again, that's my only income). Looking at Section 8-013 the only thing I see that could affect my income is that they don't allow depreciation as a deduction, but according to the IRS I have to depreciate ALL of my INVENTORY over a course of 3 years instead of just expensing it (video rental shop - yes, they still exist, barely). So that could mean that they counted $19,000 worth of inventory expenses as income! I don't know a way around this because I have to report my expenses to the IRS that way. I know it sounds weird and wrong, but there is a specific audit guide for video stores, which states that all DVDs for rental have to be depreciated using a straight-line method.

Having them count this inventory expense as income (or are they counting it as assets?), though, would seem to conflict with THIS rule for CMSP eligibility:

"Exempt property: applicant’s home, clothing, one car, and certain other
things such as items necessary for self-employment (building, INVENTORY, bank account) or used on the job (tools, second car, etc.)."

If I didn't buy DVDs for my video rental store, I would not be able to operate my store, obviously. Shouldn't inventory count as a deduction, whether I have to depreciate it or not? It's obviously necessary to run my business.

I know this is a weird case and there are probably not a lot of self-employed people who apply for CMSP, and especially not people with really weird business tax rules like that.
cicerone imposter
Reply Sun 1 Sep, 2013 11:40 pm
I'm not sure how you're booking your inventory; as an asset or expense. It can't be both.

The original entry for this inventory should have been:
Dr Inventory or Asset
Cr Cash or A/P

If you're required to depreciate this inventory over three years, the entry should have been:
Dr Depreciation expense
Cr Inventory or Asset

I'm not sure where the problem arises.

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Reply Sun 1 Sep, 2013 11:44 pm
I wasn't aware of the special depreciation schedule involved, but depreciation is definately a real expense to the business. I'm not at all sure you can sell this to case worker without spending more than it could possibly be worth. You are probably well outside his or her level of training.

I wonder if there is some confusion about the difference between the partner's withdrawal and profit. You would surely be charged with business income x 50% regardless of how much you could or actually did withdraw.

I haven't worked the field in 6 years, nor had an accounting class in several decades. Are we getting closer to a solution, or further away?
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