RURAL DEVELOPMENT TENANT CERTIFICATION INCOME VERIFICATION PROCESSING

RURAL DEVELOPMENT TENANT CERTIFICATION INCOME VERIFICATION PROCESSING AND ERRORS Presented by: LORI MERCER JUNE 2018

Agenda Topics Tenant Certification Timeframes Income Deductions Supporting Documentation & Verification Common Errors

Tenant Certification Requirements All Tenant Certs are effective on the 1st of the month New Move-ins – if move in after the 1st, TC will be effective the 1st of the next month All Tenant Certs must be transmitted by the 10th of the month in which it is effective All households must be recertified at least annually If income changes by 100 or more per month – must recertify when change of income occurs If income changes of 50 or more per month, must recertify IF tenant requests If household size changes during the year, must recertify.

So, How Much is 100 100 1200 annually or 46.15 if the tenant is paid bi-weekly. 23.08 if the tenant is paid weekly. 0.58 if the tenant is paid hourly. These figures are based on a full-time 40 hour work week.

Recertification Process Two Notification Letters May Be Required 1st – 75-90 days prior to effective date 2nd – 30 days prior to effective date if no response from household Note – a tenant certification can be transmitted via MINC at anytime during the 90 day period prior to the effective date

Expired/Late Tenant Certification An Expired or Late certification is when it is not transmitted via MINC to RD by the 10th of the effective month If tenant does not provide required information to recertify Household is no longer eligible Household must pay Note Rate Rent Lease termination should be started If tenant provided information, and borrower is at fault Borrower must pay difference between the greater of the net tenant contribution or basic rent and the note rate rent (i.e. Basic Rent is 300, Tenant’s Rent is 325, Note Rent is 400, Borrower would pay 75) Example #2 – Basic Rent is 300, Tenant’s Rent is 200, Note Rent is 400, Borrower would pay 100 Borrower must pay the overage amount from non-project funds until recertification is complete

WHAT IF THE TENANT DOESN’T QUALIFY TO LIVE AT THE COMPLEX? Do not allow a tenant to sign a recertification if they no longer qualify based on income. A tenant eligible for occupancy in Agency financed housing must qualify as a very low, low or moderate-income household. Do not allow a tenant to sign a recertification if they no longer qualify based on occupancy standards. Occupancy standards are established by the borrower and noted in the lease.

Keep At Your Fingertips HB-2, Asset Management, Attachment 6-A, Annual Income Inclusions and Exclusions https://www.rd.usda.gov/files/3560-2chapter06.pdf HUD Occupancy Handbook 4350.3, Exhibit 5-1: Income Inclusions and Exclusions https://portal.hud.gov/hudportal/documents/huddoc?id DOC 35699 .pdf HB-2, Asset Management, Attachment 6-D, Family Assets https://www.rd.usda.gov/files/3560-2chapter06.pdf HB-2, Exhibit 6-3, Acceptable Income Verification Sources https://www.rd.usda.gov/files/3560-2chapter06.pdf

Keep At Your Fingertips HB-2, Asset Management, Attachment 6-C, Allowable Deductions ( https://www.rd.usda.gov/files/3560-2chapter06.pdf) HUD Occupancy HB, Exhibit 5-3, Medical Expenses That Are Deductible and Nondeductible https://portal.hud.gov/hudportal/documents/huddoc?id DOC 35703.pdf IRS Mileage Rates (irs.gov) Select Credit & Deductions, Select Individual Deductions (Standard Mileage) Medical/Moving. HUD Income Limits (huduser.gov/) Select Data Sets, Select Income Limits HB-2, Asset Management, Attachment 6-B, Zero Income Verification Checklist (https://www.rd.usda.gov/files/3560-2chapter06.pdf)

1. The effective date of an initial or updated tenant certification form will always be the first day of the month. If tenant’s move in date is after the 1st of the month the effective date will be the 1st of the next month. Note: Check box indicating type of action 2-5.Make sure the following information matches the Project worksheet. Enter appropriate code here based on subsidy received.

7-12. Social Security number, Name, Sex, Date of Birth, Race, and ethnicity of each person (s) living in complex. For race and ethnicity codes see box in Lower left hand corner. Note: If any household member does not have a social security number but is eligible for housing, complete the field with all zeroes or use the alien registration number. MINC will assign a fictitious number. When transmitting the recertification, the assigned MINC number has to be used. 12a. Race Determination Code: How did you receive Race information. Enter appropriate code see codes below. Note: Foster children are not considered to be household members and are not to be entered as so. 8a. Enter number of foster children who will reside in the unit. 13. Enter appropriate code next to the household member(s) indicating either Minor (M), Fulltime student (F) or disabled (D). 14. Enter appropriate code next to the tenant or cotenant if they are elderly (E) or disabled (D).

18a. Enter total annual income not monthly amount. And third party verifications must be obtained from the employer. 15. Enter all net family assets even if less than 5,000. (See Chapter 6, Attn. on what to include as a net family asset.) 18b. Contact social security for percentage of annual increase. 19a. 480 per minor or full-time student. See chap. 6 sec. 2 for details. 19b. 400 per elderly or disabled househol d 16. Passbook savings rate is 2%.See chap. 6 sec. 2. 19a-d. See chap. 6 attach. 6C for allowable deduction 18a-f. See Chap. 6 attach. 6-A for what is considered income. 18g. Rural Development will not accept a tenant certification with zero income unless all income is specifically exempted. See chap. 6 attach. 6-A for exempted income. 17. Enter actual income received from assets. (See Chapter 6, Section 6.10 on calculating cash value of an asset.) Both Tenant and Co-tenant must sign and date. 22 & 24. VL Very Low, L Low, M Moderate and A Above Moderate income. Per Adjusted Income Limits HB-1-3550, Appendix 9. 23. Date tenant physically moved into apartment. 19c. If medical expenses are less than 3% of annual income (18f), enter zero. If expenses exceed the 3% rule enter only the amount over the 3%. (i.e. Medical expense is 5,000, 3% of annual income is 2,000, you would enter 3,000)

27. If this is applicable it will be the amount the tenant household actually receives from the Public Assistance Agency for shelter. Note: Be sure to complete this section. 29. Enter approved basic rent from the project worksheet Note: If utilities are included in rent enter zero. Part VIII: Mark appropriate box 28. Enter highest amount of line 25, 26 or 27.

Note: Be sure to complete this section. Based on what boxed is marked in Part VIII. 32. From project worksheet 33. Line 31 minus line 32. Note: A tenant or co-tenant has to be disabled or elderly to live in an elderly complex. Note: If household is income ineligible, a wavier from the area office must be obtained.

The Work Number Employer will not provide a VOE Employer uses The Work Number www.theworknumber.com Employee can login to the site and get an instant report Employee can call the Client Service Center to request a copy of the report 866-604-6570 Management companies may subscribe as an allowable project expense

“Top 10” Tenant Cert Boo-Boos! 10. Assets are not properly reported and/or imputed on the TC 9. Renting to Zero Income tenants or applicants 8. Using net SS income vs gross SS income 7. Miscalculating unusual income 6. Not annualizing income that is temporary/sporadic 5. Incorrect Standard Deductions (i.e. 400 vs. 480) 4. Incorrect calculations of medical expenses/disability expenses 3. Incorrect calculation of child support income and/or child care deductions 2. Tenant Cert not completed in it’s entirety or correctly 1. No supporting documentation in the tenant file of income/deductions

BOO-BOO #10 - Assets are not properly reported and/or imputed on the TC Must consider at the time of initial certification and for all recertifications Must be verified in writing by third party If unable to verify from 3rd party, can accept other forms of documentation (HB- 2, Section 6.10) Verifications are valid for 90 days and may be valid for an additional 90 days with oral verification. Can be no longer than 180 days Includes assets of all HH members Refer to HB-2 Attachment 6-D, Family Assets. Document, document, document

Case Study #1 - Assets Household has reported the following: – 500 checking account – 2,000 Savings Account earning 1% interest – Life Insurance Policy with Face Value of 10,000 – Motor Boat valued at 10,000 – Prepaid funeral arrangements valued at 20,000 How much would you reflect on Lines 15 through 17 of the Tenant Cert Form?

Case Study #1 (Assets) – Answer Line #15: 2,500 (checking and savings) Line #16: -0- (assets less than 5,000) Line #17: 20 (1% x 2,000) 20 will be carried forward to Part IV, 18 d. Face Value of Insurance, Motor Boat and prepaid funeral expenses are exempted assets

Case Study #2 - Assets Household has reported the following: 500 checking account 2,000 Savings Account earning 3% interest Life Insurance Policy with Cash Value of 10,000 Prepaid funeral arrangements valued at 20,000 10,000 CD earning an interest rate of 4.5%; withdrawal penalty is 200 and taxes of 2,000 How much would you reflect on Lines 15 through 17 of the Tenant Cert Form?

Case Study #2 (Assets) – Answer Line #15: 20,300 (checking, savings account, life insurance policy and CD) CD cash value is market value minus withdrawal penalty minus taxes ( 10,000 - 200 - 2,000 7,800) Line #16: 406 (2% x 20,300) Line #17: 510 (4.5% x 10,000 CD; 3% x 2,000 savings account) 510 will be carried forward to Part IV, 18 d. since it is greater than the imputed income on line 16 Prepaid funeral expenses are exempted assets

Case Study #3 - Assets Household has reported the following: 500 checking account 2,000 Savings Account earning 3% interest 20,000 CD earning an interest rate of 4.5%; withdrawal penalty is 200 and taxes of 2,000 1 year ago a house valued at 60,000 was sold for 30,000; closing costs were 2,000 How much would you reflect on Lines 15 through 17 of the Tenant Cert Form?

Case Study #3 (Assets) – Answer Line #15: 48,300 ( 500 checking; 2,000 savings; 17,800 CD and 28,000 net value of home) CD cash value is market value minus withdrawal penalty minus taxes ( 20,000 - 200 - 2,000 17,800) Count difference between the FMV (Fair Market Value) of asset and amount actually received: Example: FMV - 60,000 Costs - ( 2,000) Sold- (30,000) Cash Value - 28,000 Line #16: 966 (2% x 48,300) Line #17: 960 (4.5% x 20,000 CD 900; 3% x 2,000 savings 60) 966 will be carried forward to Part IV, 18 d. since it is greater than the actual income on Line #17

Case Study #4 – Assets Household has reported the following: 500 checking account 2,000 Savings Account earning 3% interest 60,000 IRA earning an interest rate of 5%; withdrawal penalty 1,000; taxes 2,000 2½ years ago, tenant sold a house for 40,000. It was valued at 60,000; unpaid loan balance 20,000; 6,000 was the expense of selling the property How much would you reflect on Lines 15 through 17 of the Tenant Cert Form?

Case Study #4 (Assets) – Answer Line #15: 59,500 ( 500 checking; 2,000 savings and 57,000 IRA) IRA cash value is market value minus withdrawal penalty minus taxes ( 60,000 - 1,000 - 2,000 57,000) Sale of house is not included as it was over 2 years ago Line #16: 1,190 (2% x 59,500) Line #17: 3,060 (5% x 60,000 IRA; 3% x 2,000) 3,060 will be carried forward to Part IV, 18 d. since it is greater than the imputed income on line 16

BOO-BOO #9 – Renting to Zero Income Tenants Zero Income – RD’s policy is to not accept a tenant certification for an applicant or tenant with zero income unless all income is specifically exempted. If applicant or tenant states they have no household income, they will need to demonstrate financial capability to meet essential living expenses.

BOO-BOO #9 – Renting to Zero Income Tenants The basis for this income must be documented in the file. Document, document, document HB-2-3560, Attachment 6-B, Zero Income Verification Checklist can be used for this documentation. The borrower MUST review the circumstances of the tenant quarterly. RD may wage match periodically Borrower can request wage match from RD at any time

Case Study #5 – Zero Income Household has reported the following: The household reported that they have no employment, they are not receiving any government benefits and their income is -0 In conversation, the tenant mentioned that they receive 50 per month from parents to buy groceries Tenant owns a car and has a cell phone. According to the Zero Income worksheet, the tenant’s father pays for the car insurance every 6 months in the amount of 1,200 and the tenant pays for the upkeep and gas and their own cell phone Occasionally the grandmother gives clothes valued at 500 for the year to her grandchildren A local charitable organization has awarded a grant in the amount of 300 per month to assist with basic needs and utilities The Tenant also receives 150 per month by the management for picking up trash around the complex What would be counted as income and what line would this be on the Tenant Certification?

Case Study #5 (Zero Income) - Answer The following would be counted as income 50 per month since it is given in the form of cash ( 50 x 12 600) – Line 18 e. The cost of the auto insurance - 2,400 – Line 18 e. 300 per month ( 300 x 12 3,600) – Line 18 c. Total Income 6,600 Exempted Income Clothing of 500 would be exempted since occasional Monthly Stipend since it is under 200

BOO-BOO # 8 Using Net SS vs. Gross SS Income For income, always use the Gross Income Usually, in October it will be announced if SS will be increasing for the following year Be sure to factor in this increase (could be 2 months at 2018 rate (Nov. & Dec. and 10 months at 2019 rate) Be sure to factor any adjustments for prior overpayment of SS benefits

Case Study #6 - SS Tenant is receiving SS Benefits as shown below. Because there was an overpayment, the SS amount below is being reduced by 80 for 6 mos. What would be their SS Income on line 18b.?

Case Study #6 – (SS) - Answer 1,492 ( 1,572 - 80) x 6 mos. 8,952 1,572 x 6 mos. 9,432 Total SS Income 18,384

BOO-BOO #7 Miscalculating Unusual Income Income from a Business Unemployment Withdrawal Accounts from IRAs or 401k

Income from a Business Must count Net Income Net Income is Gross Income less expenses If net income is a negative number, must use “0” Must request most current tax return Compare figures tenant provided with tax return

Case Study #7 – Business Household has Lawn Care Service/Snow Removal Business HH is reporting a negative loss of ( 2,754) According to previous year’s tax return, the gross income was 20,000, the expenses and depreciation were 10,000, a net income was realized of 10,000 Recertification Period is October 1 What would be counted as business income and where would you reflect it on the TC?

Case Study #7 – (Business) - Answer Based on tax return, the answer would be 10,000 Since 10 months have passed, tenant could provide additional documentation to support the negative figure of 2,754 If accept new documentation, the answer would be “0” Business Income would be reflected on Line 18 e.

Annualizing Unemployment Unemployment is counted as income If household is receiving unemployment, must figure unemployment for entire 12 months even if verification reflects that unemployment is not available for the full year Would recertify at the end of the unemployment period if need be

Case Study #8 – Unemployment Household is receiving unemployment benefits for 12 weeks for 125 What would their income be and what line would this be reflected on?

Case Study #8 – (Unemployment) - Answer 52 weeks x 125 6,500 Need to recertify at the end of the 12 weeks since income will change Unemployment can be reflected on either 18 a. or 18c.

Withdrawals from IRAs and 401k Accounts The full amount of periodic payments from IRAs, Pensions, Insurance Policies, Retirement Funds, etc. is counted as income Withdrawals from IRAs and Retirements funds that are not routine would not count as income Still need 3rd party verification Yearend statements of Mutual Funds or 401k accounts can provide information about routine annual income

Case Study #9 – 401k Tenant has a 401k account and receives 400 per month Tenant is also cashing in one of their IRAs valued at 2,000 for a vacation What would be counted as income and what line would this be reflected on the TC?

Case Study #9 - (401k) - Answer 400 per month is considered routine income and would be counted as income ( 400 x 12 4,800) Yearend statement of 401k should reflect this Depending on how this 401k is established, it may or may not be counted as an asset – could have imputed income if it is an asset The IRA of 2,000 would not be counted as income as it is not routine However there could be some imputed income from the IRA since it is an asset This should be reflected on Line 18 b.

BOO-BOO #6 Not Annualizing Income that is Seasonal / Sporadic Some employment is not year round Must estimate what the income will be for the year Must verify income If seasonal, may have to request more than 1 year’s history of employment If worked 3 years, obtain all 3 years and average If new, have employer project hours to be worked the next 12 months based on their knowledge of past work history

Case Study #10 – Annualizing Income Tenant is a construction worker in which the work is seasonal He works for a company (not self-employed) He is paid 15 per hour when working Tenant stated that he works 40 hours per week for 6 months out of the year Employer stated that he worked 40 hours per week for 6 months in 2014, 7 months in 2015 and 8 months in 2016 How much would you reflect on Line 18a as salary?

Case Study #10 (Annualizing Income) - Answer Since tenant has worked 3 years: Average the total hours for all 3 years 2014 – 1040 hours (26 weeks x 40 hours) 2015 – 1213 hours (30.33 weeks x 40 hours) 2016 – 1386 hours (34.66 weeks x 40 hours) Total Hours 3,639 / 3 years 1213 hours x 15 18,195 would be the income reflected in 18a

BOO-BOO #5 Incorrect Standard Deductions 480 deduction for each family member (not a tenant or co-tenant) Under 18 years of age; Does not include unborn child If joint custody, both parents cannot claim the deduction for the child if both parents live in subsidized housing If dispute which family gets to claim the deduction, must refer to any legal documents or IRS returns and deduction is claimed by the parent shown receiving the IRS deduction or identified in legal documents A person with disabilities who is over 18 and not the tenant or co-tenant; A full-time student of any age; Must have documentation from school Must still be living in household Foster children are not eligible for the standard 480 deduction

BOO-BOO #5 Incorrect Standard Deductions 400 deduction for elderly or disabled Must be the tenant or co-tenant Only one deduction for the household, i.e. both tenant and co-tenant are over age 62, but only 1 400 deduction can be taken Must be 62 years of age or have a disability at any age Must have documentation to support 400 deduction

Case Study #11 – Deduction Tenant & Co-Tenant are not elderly or disabled There are 3 children and one on the way, ages 10, 18 & 19 18 year old is a full-time student, 19 year old is working but not a student The co-tenant’s 64 year old disabled mother is living with them What deductions are this family eligible for?

Case Study #11 – (Deduction) -Answer 480 deduction for 2 children (Ages 10 & 18) 18 year old is a full time student No deduction for unborn child No deduction for 19 year old since over age and not a full-time student Note – would need to count the income of the 19 year old 480 for the disabled mother Must have documentation of disability No elderly deduction because mother is not the tenant or co-tenant Total Deduction 1,440

Case Study #12 - Deduction Tenant is 35, Co-Tenant is 30 and disabled Tenant has a child who is 4 and is sharing joint custody with his ex-wife who also lives in another RD complex. The child lives with the ex-wife during the week, but with the tenant every weekend and 6 weeks through the summer The tenant (father) claims the child on his tax return What deductions is this eligible for?

Case Study #12 – (Deduction) - Answer 400 because the co-tenant is disabled Documentation must be provided of disability 480 deduction for the 4 year old child Even though the child spends more time with the mother, the tenant (father) provided a copy of the divorce decree and tax return which allows him to claim the child as a dependent. The mother could not claim a deduction for the child at the other RD complex.

BOO-BOO #4 – Incorrect Calculations of Medical Expenses/Disability Expenses Medical expenses can be deducted for elderly/disabled household If household qualifies for 400 deduction, then the medical expenses for the entire household can be claimed Expense to be claimed is what is anticipated for next 12 months based on past history Can allow for past medical event that is not likely to recur (i.e. unplanned surgery, injuries from car accident, etc.) if not claimed previously

BOO-BOO #4 – Incorrect Calculations of Medical Expenses/Disability Expenses Reimbursed medical expenses from insurance cannot be claimed The amount of medical expenses that can be claimed as a deduction is anything over 3% of annual income (not adjusted) Must have documentation of medical expenses – Over the counter (OTC) medical expenses must be prescribed by licensed practitioner in order to claim deduction – Must have copies of receipts and prescriptions for OTC expenses

Case Study #13 – Medical Expenses Elderly Household had SS Income of 600 per mo. Tenant Cert is effective 1/1/2017 Medicare premium is 100 per mo. Supplemental Health Ins. Policy is 200 per mo. Pharmacy prescriptions reflect 2,000 in 2016 Tenant is still taking the same prescriptions Hospital Bill owed of 500 in which tenant is paying 100 per mo. OTC receipts reflect 200 (Aspirin, Pepto Bismol, Ben Gay, Band-Aids, etc.) Hearing Aid purchased in 2016 for 2,000 and Batteries of 100 Supplemental insurance paid 1,500 for the hearing aid What would the Medical Expense Deduction be?

Case Study #13 – (Medical Expenses) - Answer Allowable Medical Deductions 1,200 for Medicare ( 100 x 12) 2,400 for Supplemental Health Ins. ( 200 x 12) 2,000 Prescription Medicine 500 payment on hospital bill 600 for hearing aid and batteries Allowed 500 for hearing aid since this was not claimed in 2016 and was not reimbursed by insurance Not allowed - 1,700 OTC Medicine since no prescriptions - 200 Hearing Aid reimbursed by ins. - 1,500 Total medical expenses anticipated are 6,700 Total Medical Deduction allowed - 6,484 3% x 7,200 (Line 18 f. which is 600 month x 12) 216 6,700 – 216 6,484

Disability Assistance Expense Deduction for unreimbursed, anticipated costs for attendant care and “auxiliary apparatus” for each disabled family member HH does not have to qualify as an elderly household Qualification for Deduction Must enable a family member 18 years of age or older (who may or may not be the disabled member) to be employed If more than one family member enabled to work, must consider the combined incomes of those persons Must have documentation of disability and need for animal/apparatus, etc. Allowable deduction is any cost over and above 3% of annual income (not adjusted) Cannot exceed the earned income received by the family member(s) who are enabled to work

Case Study #14 – Disability Expenses Tenant and co-tenant are both 40 years old and have a 15 year old son who is disabled. It is determined the son would be allowed a seeing eye dog. Tenant is away from the family for a short stint in the military and earns 10,000 per year; co-tenant stays at home with the son but has found a job and will earn 6,000 per year It is determined that the cost of the seeing eye dog is 5,000, 2,000 of which is covered by a special grant from a service organization. Vet costs per year will be 1,500, food for the year will be 2,000 and supplies will be 500 What would the Disability Assistance Deduction be?

Case Study #14 – (Disability Expenses) - Answer Allowable Disability Assistance Expenses 3,000 for the seeing eye dog ( 5,000 - 2,000 grant) 1,500 for vet visits 2,000 for food 500 for supplies Total anticipated disability assistance expenses 7,000 Household’s annual income of 16,000 x 3% 480 Co-tenant is the one enabled to work and has an annual income but you use total household income to calculate 3% allowance Total available to claim would be 7,000 - 480 6,520 Total amount allowed for disability assistance expense is 6,000 Amount of co-tenant’s annual salary

Disability Assistance Expense For Elderly HH that is eligible for BOTH medical and the disability deduction, it must be calculated separately Must calculate disability assistance first Reminder – it cannot exceed the income of the person(s) that has been enabled to work Then calculate allowable medical expenses When family has both disability and medical expenses, review both to make sure no expense has been inadvertently included in both categories Add Medical and Disability Assistance expenses and deduct from 3% of household annual income

Case Study #15 – Medical and Disability Expenses Elderly Household – Co-tenant is disabled Co-tenant needs a live-in aide in order to allow Tenant to work Tenant’s income is 20,000 Live-in Aide expense is 10,000 and the aide has other income of 5,000 Co-Tenant also needed auxiliary equipment (wheelchair) costing 5,000 They also have non-reimbursed medical expenses of 3,000 What would the Disability Assistance and Medical Deduction be?

Case Study #15 – (Medical and Disability Expenses - Answer Disability Expense 15,000 Live-in Aide was 10,000 Auxiliary Equipment was 5,000 Medical Expense 3,000 Total Disability and Medical Expense Less 3% of HH Annual Income 18,000 - 600 20,000 x 3% Total Allowable Deduction 17,400 Note – the Live-in Aides’ other income of 5,000 is excluded as it is not counted toward the household’s income

BOO-BOO #3 Incorrect Calculation of Child Support Income and/or Child Care Expenses Child Support Income: Household must include all alimony or child support payments Must have verification (court orders, statements from enforcement agencies, divorce decree, or other records to support payment) The applicant/tenant must report what was paid in the last 12 months If not receiving child support payments, the applicant/tenant must show that they have requested assistance from the state or local entity responsible for enforcement of payment Note: If tenant/co-tenant is paying child support – this is not an allowable deduction even if this is being garnished from their salary

Case Study #16 – Child Support Tenant has 2 children and is to receive child support payments of 500 per month Divorce Decree supports this amount Tenant states she is not receiving these payments and provides a copy of last month’s bank statement which reflects that no child support was deposited What would you count as income for the Child Support and what line would it be on the TC?

Case Study #16 – (Child Support) -Answer Child Support Income is: 6,000 Applicant/Tenant did not provide evidence of what was received for the last 12 months; and Applicant/Tenant had not pursued collection through State Agency or legal action If documentation is provided then you could report whatever is presented as income Reflect on Line 18 e.

Child Care Expenses Reasonable child care expenses for the care of a child age 12 or under may be deducted from “annual (gross) income” if they: – Enable an adult family member to actively seek employment, be gainfully employed, or further his/her education; and – If the expenses are not reimbursed; and – If they have demonstrated that there are no other adult household members available for child care

Child Care Deduction The amount may not exceed the amount of income received from employment. The amount cannot be paid to a household member The amount of child care hours must parallel the hours household member works or goes to school including travel time. The applicant must identify the household member who can go to work or school as a result of the child care. The tenant file must contain justifying documentation to support the deduction.

Case Study #17 – Child Care Tenant earns 18,000 & Co-Tenant works part-time 4 hours per day/5 days a week and earns 4,000 and attends school part-time 4 hours per day/5 days a week The Tenant identified that the Co-Tenant would be able to work and go to school if child care was provided They have 2 children ages 13 & 11 and they pay 5 per hour for 8 hours/5 days a week for each child. What would the Child Care Deduction be and what line would it be on the TC?

Case Study #17 – (Child Care) - Answer Child care expense for the time the co-tenant is working is 4,000 – 5 x 4 hours 20 per day x 5 days 100 per week x 52 weeks 5,200 – Can only claim 4,000 since income of co-tenant is less than child care expense – Cannot claim the expense for the 13 year old Child care expense for co-tenant while going to school is 5,200 – 5 x 4 hours 20 per day x 5 days 100 per week x 52 weeks 5,200 – Child care cost is not limited while attending school Total allowable Child Care Deduction is 9,200 ( 4,000 5,200) and would be reflected on Line 19d of Tenant certification

BOO-BOO #2 – Tenant Certification is not Completed in it’s Entirety or Correctly Part I, Item 1., Action type is not correctly identified i.e. Tenant moves out, and co-tenant becomes tenant, must mark CoTenant to Tenant Box Must recertify because household composition changed Part II, 6. Tenant Subsidy Code is not completed correctly If getting State RA, Code #4 Don’t use Code #5, it is not working correctly at this time Code #7 if other types of subsidy at basic rent (i.e. church is paying subsidy) Part II 7. – Social Security Numbers All households members are required to have a SS # Tenants will need to provide a SS# for all household members over the age of 6.

BOO-BOO #2 – Tenant Certification is not Completed in it’s Entirety or Correctly Part II, 14. – Coding for Disabled (“D”) and Elderly (“E”) Insert a “E” or “D” by only the Tenant and Co-Tenant – be sure to mark Elderly Status box if any of the above applies Part IV, Item 18 g. – if household has reported “zero” income, and the income is exempted, then this box must be marked. Part V, Item 23, be sure to show the actual date of move-in (does not have to be the 1st of month) Part V, Item 24, reflect income level at the time of move-in. This should not be changed on subsequent recertifications

BOO-BOO #2 – Tenant Certification is not Completed in it’s Entirety or Correctly Part VII, Item 29 a. and 30 a, Basic Rent & Note Rate Rent – be sure rent is the same as the current approved budget If project worksheet does not agree with budget, notify servicing office immediately. Part VII, Item 29 b. & 30 b., Utility Allowance If utility costs are included in rent, enter “0” Utility Allowance must agree with approved budget. If it does not agree, notify servicing office immediately.

BOO-BOO #2 – Tenant Certification is not Completed in it’s Entirety or Correctly Part X, Certification by Borrower Be sure to indicate if household is eligible This includes income eligible and occupancy eligible If not eligible, must obtain waiver or approval from servicing office prior to renting to household Part VI & X, Tenant/Co-Tenant and Borrower Signatures Even though tenant certification is transmitted, this form must still be signed by all parties and a copy provided to the tenant. Signed tenant certification must be retained in the Tenant File

BOO-BOO #1 - No Supporting Documentation of Income, Deductions, Disability, etc. Verify and Document Verify and Document Verify and Document Verify and Document Verify and Document

OPEN TIME FOR ADDITIONAL QUESTIONS!!!! THANK YOU, THANK YOU, THANK YOU FROM RD – MFH STAFF