Annual Computation Method

The following steps are used to determine net self-employment income when using the annual computation method:

Determine the projection period.

Determine the total gross self-employment income for the past year.

Determine the total allowable expenses for the past year.

Determine the yearly net income by subtracting the total allowable expenses from the total gross income.

Determine the monthly net income by dividing the total yearly net income by the number of months of earnings history used.

If the self-employment income is annual and no substantial changes are expected, the income should be projected for 12 months. If the self-employment income is seasonal and no substantial changes are expected, the income should be projected for the seasonal period.