Income Calculations for HUD Programs - LeadingAge … Calculations...Microsoft PowerPoint - Income...

3/8/2013

Copyright 2013 Ross Business Development. Provided Exclusively for Leading Age New York 1

Income Calculations for HUD Programs

Presented by Mary Ross

President, CEORoss Business Development, Inc.www.rbdnow.com

Introduction

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Agenda10:00 AM Until 12:00 PM IntroVerification Income Income from AssetsDeductions

Basics

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Income Earned Income Unearned Income Income from Assets

Verification EIV Third-party Review of

Documents Notarized self-

certification

Verification

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VerificationEIVThird-partyWrittenOralElectronic

Review documentsSelf-certification

Third-party – HH 4350.3 P 5-13 Written

Directly from source SSA/Employer Medical Professional

Oral

Electronic Internet (such as EIV or online banking) Fax Email

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EIV for Earned Income

Use EIV plus4 Current

Consecutive Pay Stubs

Use Traditional Verification

EIV For SS and Medicare

Electronic 3rd Party VerificationUse Unless No Data Resident Disputes Data is not complete

For HUD programs – no other printout is required – do not need award/benefit letter

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Review of DocumentsUse When Third-party

verification is not possible or is not required

Third-party verification is delayed

Must document why you did not use 3rd party

Self Certification*An owner may accept a tenant’s

notarized statement or signed affidavit regarding the veracity of

information submitted if the information cannot be verified by another acceptable verification

method.

*unless prohibited by HUD

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Earned Income

Employment Income-General

Include for HOH, co-HOH or spouse

Include for all adultsExcept Dependents

Full-time StudentsDisabled

Except Live-in Aides

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Employment Income -DependentsMinors – Do not count any

employment income unless HOH, co-HOH or spouse

Full-time students – only count $480

Disabled adult – count earned income

Unearned Income

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Several SourcesSocial SecurityVAPensionRetirementUnemploymentEtc.

Social SecurityRefer to HH

4350.3 R1, C3, P 5-6

Use Gross Amount x 12 months

Do not consider deductions for unpaid Child support Taxes Student loans Etc.

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Prior OverpaymentIf an agency is reducing a family's benefits to

adjust for a prior overpayment (e.g., social security, SSI, TANF, or unemployment benefits),

count the amount that is actually provided after the adjustment.

Gross – Repayment Amount x 12

Do not use net amount because it may include other deductions such as Medicare

Cents or No Cents

Cents If using an

award/benefit letter that indicates cents

Even if the cents are not paid

No Cents If using EIV or

another source that does not include cents

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HUD Clarification 71. Question: When calculating SS income, owners/agents should use the gross amount. But, do owners/agents include the cents on SS payment amounts, although not received? For example, if the gross amount is $570.20, but the net is $570, do owners/agents calculate as $570.20 x 12?

Answer: When calculating Social Security income, use the gross amount shown on the third-party verification, including cents.

VA Disability

Section 8

Exclude Deferred Payments*

Count Periodic Monthly Amounts**

Non Section 8 236 PRAC PAC BMIR

Count Deferred Payments

Count Periodic Monthly Amounts

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Aid & Attendance HUD clarified that VA Aid and Attendance

income is included in the annual income calculation

New Bill has been introduced by Congressmen Joe Heck (NV), Jim Renacci (OH), Judy Biggert (IL), and Al Green (TX).

Bill proposes that A&A is excluded Bill passed the House Financial Services

Committee unanimously Bill passed the House by voice vote Bill has not passed Senate. Projection is 40% likelihood to pass.

Income from Assets

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Assets Any asset that can be converted to cash

Not personal use items

Fair Market Value = face value

Cash value = face value less any costs, expenses, penalties, taxes or liens that would be paid to sell the asset or would be paid when the asset was converted to cash

Checking/Savings

Checking Account

Average balance over six months

Savings Account/Direct Express Debit Cards

Current balance obtained within 120 days of certification

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Retirement Accounts

Balance in accounts is accessible

Cash value is the balance less penalties and taxes

Income is interest earned

Regular Periodic Payments

Some Assets/Retirement Accounts make regular periodic payments401KAnnuityNot ROTH

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Monthly or Quarterly Periodic Payment Standard Payment

Usually Monthly

Count payment as income

Do not count the cash value of the asset

Do not count interest income from the asset

Retirement Accounts with RMD RMD = Required Minimum Distributions

Difficult when withdrawn once a year

Count the one-time distribution as income

Do not count the asset

Do not count interest/dividend income from the asset

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Example Resident is currently receiving SSA in the amount of

$500/ month. $6000.00 per year IRA with a FMV of $300,000.00 cash value of

$150,000.00 earning $ $5000.00 per year We know resident will take distribution of $10,000.00

in December but we don’t know what the resident plans to do with the money

AR is created

SSA = $6000.00 Other Income = $10,000.00

AR Total Annual Income is $16,000.00

Home as Rental PropertyThe home would be counted as an

asset Determine the cash value of the asset

by deducting from the current fair market value:(a) any unpaid balance on any loans secured by the property and(b) reasonable costs that would be incurred selling the asset

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Rent Received The rent received would be considered

income from the asset. Can count this as income from a business,

if the tenant can provide some form of documentation such as a business license a tax ID or a tax return

Lump Sum Payments

Deferred SSA/SSI

Insurance Settlements

Lottery Winnings

One-Time Monetary Gifts

Etc.

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Considerations If the asset is earning income, make sure

the amount earned along with other increases does not increase household income by $2400 or more

No IR required unless it does

Count as asset on next certification if resident still has possession

Assets Disposed

Any amounts in excess of $1000 given away in the last 2 years

Cash value of any assets sold or given away for less than current fair market value in last two years

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ConsiderationsDo not count assets surrendered

as a result of:

DivorceCourt SettlementForeclosureBankruptcy

The Medical Expense Deduction

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Whose Expense Counts

If Household is Elderly or Disabled

Count out-of-pocket medical expenses for

ALL family members regardless of Age

Do not count live-in aide’s out-of-pocket

medical expenses

Count the amount the resident pays the

live-in aide

Anticipated Medical Expenses

Anticipate Medical Expenses for the Next 12 months

Ask if a resident has any anticipated out-of-pocket medical expenses

Resident is supposed to tell you

Review certification history for any omissions

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Recurring Medical Expenses Prescription Drugs Regular Medical Appointment/Treatment Caregivers Payments for Medical Bills Insurance Premiums Long-term care (special) Etc.

See HH 4350.3 R1, C3, Exhibit 5-3

Recurring Medical ExpensesCurrent Prescriptions Or

Regular Medical Appointments

Usually, the resident has no way of knowing what the costs will be

Use receipts from the prior year to estimate the upcoming year’s medical expenses.

Payment history can be obtained through a pharmacy

Some pharmacies only provide copies to the resident

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Recurring Medical ExpensesNew Prescriptions Or

Regular Medical Appointments

Need to get an estimate of the expense

See Handbook Questions and Answers

Question # 8787. Question: A tenant has provided a list of medications that he/she is prescribed to take. If the tenant has been buying some of the medications, but cannot afford to buy all of them, should the owner/agent allow the expense deductions for all of the medications on the list, if the cost can be verified by the pharmacy?

Is this a situation where only the medications for which the tenant has receipts can be counted?

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Answer # 87Answer: The owner/agent must include all medical expenses the family anticipates to incur during the 12 months following certification/recertification that are not reimbursed by an outside source.

If the tenant indicates that he/she will begin to purchase the medications during the next 12 months and the cost will not be covered by an outside source, the cost of the medications may be included in the deduction.

If the tenant does not plan to purchase the medications for the next 12 months, the tenant may request an interim recertification when he/she begins purchasing the prescriptions.

Paying Medical BillsAsk a resident about any medical

payments that will be made in the next 12 months

If a resident is paying down a bill you must include the amount the resident will pay in the next 12 months

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One-Time Non-Recurring

Not really “one-time”Dental TreatmentsHearing AidesGlassesUnexpected treatmentKidney infectionRespiratory/pulmonary treatmentSurgery

Non-RecurringAsk about any one-time non-recurring

expenses that were not anticipated on the last certification

Any out of pocket expenses that have been paid since the resident moved in, but not included on the 50059, should be included on the AR (or IR as appropriate).

Proof of payment is verification of the expense

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Making PaymentsWhen a family is making regular payments

over time on a bill for a past one-time medical expense, payments are included in anticipated medical expense

If a family has received a deduction for the full amount of a medical bill it is paying over time, the family cannot continue to count that bill even if the bill has not yet been paid

Mileage

Mileage to and from medical treatment is also included as part of the medical expense deduction

Current Medical Mileage Rate 2013

24 cents per mile driven for medical purposes

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Over-the-Counter

Includes: Aspirin Testing Strips Glycoside Certain Vitamins Etc.

Must be necessary to treat a specific medical condition

Not for General Good Health

Need must be verified by a medical practitioner licensed in the locality where practicing

Personal Use ItemsCount expense if item is used

primarily to prevent or alleviate a physical or mental defect or illness

Cost of a wig to improve the mental health of a patient who has lost all of his or her hair

Incontinence suppliesReading glasses

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Insurance Medical insurance

premiums or costs of an HMO are included as part of the medical expense deduction

Ask about deductible

Long term care premiums are included as part of the medical expense deduction

Special requirements

Long Term Care Insurance

The family member paying a long-term care insurance premium must sign a certification that states the insurance is Guaranteed renewable, Does not provide a cash surrender value, Will not cover expenses covered under

Medicare, and Restricts the use of refunds

See HH 4350.3 R1, C3, Exhibit 5-4 for Sample

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Life Line

Do not include cost of Life Line, cell phones or other devices used to

contact emergency support


Question # 88

88. Question: Can the cost of Life Line or a cell phone recommended by a physician for a frail, elderly person to use in case of a medical emergency be counted as a medical expense?

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Answer # 88The cost of Life Line or a cell phone should not be considered as a medical expense.

An allowable medical expense is an item that treats or alleviates a medical condition. Life Line or a cell phone do not qualify as a medical expense since neither have an impact on the actual medical condition.

Assistance/Companion Animals

Costs associated with Assistance and Companion Animals is included in the medical expense deductionCost of the animalCare of the animalVet billsFood Grooming

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Question # 93

93. Question: Chapter 5, Paragraph 5-10 D.8.h refers to the upkeep of a service animal as a medical expense.

What are some of the things that HUD considers “upkeep” of the service animal?

Answer # 93Items considered a part of the “upkeep” of a service animal include dog food, veterinary bills, required shots, license fee, and the ID tattoo on the ear.

Owners must use their discretion when discerning what is considered “upkeep” items.

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Household Help

Cost of Household Help is generally excluded…..

But not always


Question # 92

92. Question: If a tenant in a wheelchair pays $20 every two weeks to enable him/her to run errands, can the amount spent be considered a medical expense?

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Answer # 92Household help is not a medical expense.

As stated in the examples in Chapter 5, Exhibit 5-3 concerning "Household help" -it is counted as a medical expense only if it is a nursing-type service or certain maintenance, or personal care service provided for qualified long-term care

Resources

Handbook Q & A http://portal.hud.gov/huddoc/DOC_20476.pdf

IRS -http://www.irs.gov/publications/p502/ar02.html#en_US_2012_publink1000178851

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Verification of the Medical Expense

Must Have Process

What Expenses count? IRS Rule of Thumb

How to VerifyReceipts for 12 monthsReceipts for 1 quarterReceipts for 1 month

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Question # 8989. Question: Can the various options for calculating medical expenses be combined on one certification?

When calculating medical expenses, can owners/agents choose which method to use or should the owner/agent use the past twelve months, if anticipating a tenant’s medical expenses is not possible?

Must the same method be used consistently or on a case-by-case basis?

If using the previous twelve months and an ongoing expense stops or a new one starts, should an interim be conducted?

Answer # 89Answer: The owner/agent determines the procedure to be used to determine anticipated medical expenses based on the guidance in Chapter 5, Paragraph 5-10 D.

Since this amount is an estimate, the owner should use a methodology that will provide the most accurate estimate.

Whatever procedure is selected should be used consistently for all tenants.

It is possible that all options would be included in the owner’s procedure for determining medical expenses.

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