Chapter 5. Calculation Problem Areas
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Transcript of Chapter 5. Calculation Problem Areas
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Chapter 5.Calculation Problem Areas
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Chapter 5. Section 1. Introduction
Learning ObjectiveUnderstand and address those difficult aspects of
rent calculation where errors are most likely to occur
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Introduction
• In this session, we will focus on the error-prone components of income and rent determination– Identified in HUD’s Policy Development and
Research report, “Quality Control for Rental Assistance Subsidies Determinations”
– Emphasized in RIM reviews
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Introduction
• Purpose of the chapter– Identify common errors– Examine reasons for errors– Practice the more difficult calculations
• We will not cover every facet of rent calculation
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Introduction
• Review of problem areas:– Employment income– Training program income – The earned income disallowance (EID)– Assets and asset income– Utility allowances– Payment standards
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References
• Appendix A– Web Addresses (page A-1)– Training Program Income Notice (page A-5
through A-24)
• Appendix B– Regulation Excerpts (page B-1 through B-28)– HCV Guidebook Excerpts (page B-29 through
B-125)
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Chapter 5. Section 2.Employment Income
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Employment Income
• PD&R report found a 68% error rate for families with earned income (employment income)– 88% for families with more than 1 source of
earned income– Employment income is single strongest
predictor of errors in rent calculation
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Employment Income
• Annual income from employment includes full amount, before payroll deductions, of:– Wages and salaries– Overtime pay, commissions, fees, tips and
bonuses– Other compensation for personal services
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Employment Income
• Reported income will usually be in amounts over a period of time that are less than annual (hourly, weekly, bi-weekly, semi-monthly, monthly, etc.)– Hourly/full time: rate X 2080– Weekly: amount X 52– Semi-monthly: amount X 24– Bi-weekly: amount X 26– Monthly: amount X 12
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Verification Issues
• Most errors are caused by lack of adequate verification
• Either PHAs do not obtain third-party employment verification, or the verification is received but not used
– Rent calculated using pay stubs
– File not documented as to why third party was not available
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Verification Issues
• Learning Activity 5-1: (Page 5-5)• Paystubs vs. Employer Statement?• Purpose: Discrepancy Awareness
– Part 1: Calculate annual income using paystubs (page 5-5 through 5-8)
– Part 2: Re-calculate (page 5-8) using third-party verification completed by employer (page 5-9)
– Part 3: Group discussion
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Unreported and Underreported Income
• Some families fail to report or underreport employment income– One common form of underreporting: reporting
net earnings, not gross
• Use UIV to identify unreported employment
• Inform applicants and participants of UIV sources to be checked
– Encourages more accurate reporting
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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
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Sporadic Income Example
• Daniel Morgan – receives Social Security Disability plus works as handyman occasionally
• Claims only worked a couple times last year (no documentation)
• Answer the three questions.
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Answer: Sporadic Income• Does this fit description of sporadic income?
– Yes, his earnings fit the category of nonrecurring, sporadic income
• How do you handle his working income?– Don’t include in annual income– Tell Mr. Morgan he must report any regular work or
steady jobs he takes
• What type of documentation should the PHA have in Daniel’s file to support its decision?– Note in file explaining situation and its decision– UIV documentation if PHA has access
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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
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Seasonal Employment• Method 1: Annualize current income
– Conduct interim reexam when income changes
• 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”
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Seasonal Employment: Example
• Marcy Walsh is currently employed as a tile setter with ABC Construction, earning $1000 per month
• For the last 4 years, she has worked this job for 6 months per year during the construction season
• During the other 6 months of each year, she works part-time at Domino’s Pizza, earning $400 per month
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Calculation: Sample Method 1
• Multiply current income ($1000/month) times 12 months– $12,000 per year
• When the construction season ends, conduct an interim reexam– Multiply income from Domino’s ($400/month)
times 12 months– $4800 per year
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Calculation: Method 2
• Calculate anticipated income from all known sources for the entire year– ABC Construction:
$1000 x 6 months = $6000– Domino’s Pizza
$ 400 x 6 months = +$2400– TOTAL: $8400
• NOTE: There is no interim reexam when the participant changes jobs
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Incorrect Calculation of Method 1
• If the PHA counted only the current income ($1000/month) times the anticipated length of the job (6 months), annual income would be calculated as $6000– Family would pay less than TTP required by
regulations– Common error
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Seasonal Employment
• PHA needs a written policy for this situation– Policy should be implemented consistently– Families with seasonal employment should be
informed of policy• If PHA adopts Method 1, family needs to
know interim reexam will be conducted• If PHA adopts Method 2, family needs to
know interim reexam will not be conducted
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Chapter 5. Section 3.Training Program Income
See Appendix A for Training Program Notice (page A-5) and CFR (page B-15)
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Training Program Income
• HUD-Funded Training ProgramExclude all amounts received under the
training program while they are in the program
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HUD-Funded TrainingThe head of a tenant family receives $500 mo. in TANF.
She enrolls in a HUD-funded training program operated by the PHA. TANF benefits stop. She receives $600 mo. while in the training program. Upon completion, she receives a job at the PHA earning $700 per month. What monthly income is counted during training?
How long is income excluded?
What is counted after completion?
None
$700 (All)
During training only
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Other 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 employment training programs
cited
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Training Program Income
• To qualify, an employment training program must have clearly defined goals and objectives.
• PHAs may adopt written policies that establish standards for these programs.
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Training Program Income
• Training may include– Occupational classroom training – Subsidized on-the-job training – Basic education
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Training Program Income
Incremental income:
Increase in total amount of welfare, benefits, and earnings of family member after enrollment in training program as compared to income before enrollment
Only the incremental increase is excluded.
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Training Program Income
• 5.609(c)(8)(v)– Exclude incremental earnings and benefits
only while the family member participates in the employment training program
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Example of Other Training Program Income
A family head receives $400 per month in TANF. He then enrolls in a qualified State employment training program and receives $550 per month in training income. TANF benefits stop.
What income is counted?
How long will income be excluded?
$400 - the extra $150 is not counted
While he remains in the training program
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Training Program Income Issues
• When new employment is reported, PHA needs to determine whether employment is part of a training program
• Notice PIH 2001-15 identified frequent errors in this component– Recommends educating participants on
eligible types of training programs
• Check data-gathering forms for questions
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Chapter 5. Section 4.Earned Income Disallowance
See Appendix A for Website Address
For FAQs on EID
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Earned Income Disallowance
• Final Rule– Effective date 4/20/01
• Technical Amendments 2/13/02
• Regulations: 24 CFR 5.617
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• Regulations are similar to earned income disallowance (EID) regulations for Public Housing, except:– For Section 8, will only apply to family
members with disabilities• PH EID regulations are not restricted to persons
with disabilities
Earned Income Disallowance
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• Effective 3/15/02, HUD revised the definition of “qualified family”– Family no longer required to meet the
regulatory definition of disabled family
Earned Income Disallowance
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Earned Income Disallowance
• EID excludes increases in income attributable to new employment or increased earnings over income received by that family member prior to qualifying for the disallowance.– The exclusion applies only to the income of
the family member with disabilities, not the entire household
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EID Qualifications
• Family must be a program participant– Already receiving HCV assistance
• Family must experience an increase in annual income as a result of one of the following reasons . . .
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1. Employment by a family member who– Is a person with disabilities, AND– 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
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2. Increased earnings by a family member:– Who is a person with disabilities, AND– Whose increased earnings occurred during
member’s participation in an:• economic self-sufficiency program• job-training program
Earned Income Disallowance for Persons with Disabilities
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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.
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HUD Definition of Economic Self-Sufficiency Program
• Economic self-sufficiency programs can include:• job training
• employment counseling
• work placement
• basic skills training
• education
• English proficiency
• workfare
• financial or household mgmt
• apprenticeship
• activity necessary for workOR……...
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3. New employment or increased earnings by a family member who is a person with disabilities AND 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
EID Qualifications
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• During initial 12 month exclusion period: – Exclude the full amount of increase in income
attributable to employment or increased earnings• 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 Initial 12-Month Exclusion
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Determining The Incremental Increase
• Determine the annual income of the EID-qualified 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
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Example #1
• Mary Jones had $4000 in TANF benefits at the time she became employed. She is earning $12,400 at her new job, and her TANF benefits have stopped.
• How much is the incremental increase?
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Example 1: Think it Through
• TANF $4000• Empl $___0
• Total $4000
• TANF $0• Empl $12,400
• TOTAL $12,400
Did we exclude all of her earned income?
How much did we exclude?
Why didn’t we exclude the $12,400?
No
$8400
Only the amount which exceeds the baseline is excluded
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Example #2
• John Smith had no income at the time he became employed at $12,400 per year.
• How much is the incremental increase?
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Example 2: Think it Through
• Other Inc $ 0• Empl $___0
• Total $ 0
• Other Inc $0• Empl $12,400
• TOTAL $12,400
Did we exclude all of his earned income?
How much did we exclude?
Why?
Yes
$12,400
The baseline is zero
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• Exclusion is reduced to 50% of the increase attributable to employment or increased earnings
• 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 (not needed to be consecutive months)
EID Second 12-Month Exclusion and Phase-In
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• 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
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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
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• Remember, the disallowance does not apply for purposes of admission to HCV
• To ensure that every disabled HCV participant who is eligible for EID receives it and is calculated properly, PHA must consider:1. How will you document – what evidence will you
provide:A. That the family is a “qualified family”?B. The income exclusion in the family’s file?
EID Issues
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2. How will you track the number of months income has been excluded and when the exclusion must end?
EID Issues
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EID Issues
• Tracking can be complex– In an ideal world, a person with disabilities
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
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In an Ideal World
1212 2424 3636 4848
100% of increase
100% of increase
50% of increase
50% of increase
Count all incomeCount all income
1212 2424
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EID Issues
• Tracking– In reality, the exclusion may stop and start
more than once, making it a challenge to figure out how much to disallow when there is a break during an exclusion period.
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Reality may be….
9 months9 months 6 months6 months 9 months9 months
100%100%
100%100% 50%50%50%50%
It’s over…It’s over…
1212 2424 3636 4848
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EID Issues
• Tracking– 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.”
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Or…….Reality may be
9 months9 months 3 months3 months
100%100%100%100% 50%50%
It’s over…It’s over…
2 months2 months
1212 2424 3636 4848
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EID Issues
• Complexity of the regulation contributes to rent determination errors– Per HUD’s PD&R report
• Difficulty in tracking exclusion periods– PHA needs standardized system
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EID Issues
• Calculation of “incremental increase”– May necessitate conducting interim reexams
throughout phase-in period• Regardless of PHA’s interim policy• To simplify matters, PHA may align reexam date to coincide
with the beginning of the phase-in period
• Best source for answers:– RHIIP:
www.hud.gov/offices/pih/programs/ph/rhiip/faq.cfm– EID: www.hud.gov/offices/pih/phr/about/ao_faq.cfm
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Earned Income Disallowance
• Learning Activity 5-2:
• EID Calculation
• Read the case study
• Part 1: Calculate the prequalifying income and the exclusion amount and wages for EID member
• Parts 2-4: Recalculate for changes
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Answers: Baseline Income
• Katie’s prequalifying (baseline) income is:
• $5,000
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Part I, Step 1
A. Earned income of EID family member
B. Other income of EID family member C. Total annual income of EID family member (A + B)
D. Prequalifying income of EID family member E. Full exclusion (C - D, but no more than A)
F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 5,000$14,500$ 5,000$ 9,500
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Part I, Step 2
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)
$ 9,500
$ 9,500
$ 0
Step 2: Determine EID family member’s wages after exclusion.
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Part I, HUD 50058
Form HUD-50058
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)
Katie 1 N
Katie 1 W
7g. Total
$5,000 $ 5,000$9,500 $ 9,500 0
$ 5,000
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Part 2, Step 1
A. Earned income of EID family member
B. Other income of EID family member C. Total annual income of EID family member (A + B)
D. Prequalifying income of EID family member E. Full exclusion (C - D, but no more than A)
F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 2,000$11,500$ 5,000$ 6,500
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Part 2, Step 2
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)
$ 9,500
$ 6,500
$ 3,000
Step 2: Determine EID family member’s wages after exclusion.
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Part 2, HUD 50058
Form HUD-50058
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)
Katie 1 N
Katie 1 W
7g. Total
$2,000 $ 2,000$9,500 $ 6,500 $ 3,000
$ 5,000
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Part 3, Step 1
A. Earned income of EID family member
B. Other income of EID family member C. Total annual income of EID family member (A + B)
D. Prequalifying income of EID family member E. Full exclusion (C - D, but no more than A)
F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 6,000$15,500$ 5,000$ 9,500
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Part 3, Step 2
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)
$ 9,500
$ 9,500
$ 0
Step 2: Determine EID family member’s wages after exclusion.
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Part 3, HUD 50058
Form HUD-50058
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)
Katie 1 N
Katie 1 W
7g. Total
$6,000 $ 6,000$9,500 $ 9,500 0
$ 6,000
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Part 4, Step 1
A. Earned income of EID family member
B. Other income of EID family member C. Total annual income of EID family member (A + B)
D. Prequalifying income of EID family member E. Full exclusion (C - D, but no more than A)
F. 50% exclusion during phase-in period, if applicable
(E x 0.50)
Step 1: Calculate EID family member’s
exclusion amount.
$ 9,500$ 6,000$15,500$ 5,000$ 9,500$ 4,750
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Part 4, Step 2
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)
$ 9,500
$ 4,750
$ 4,750
Step 2: Determine EID family member’s wages after exclusion.
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Part 4, HUD 50058
Form HUD-50058
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)
Katie 1 N
Katie 1 W
7g. Total
$6,000 $ 6,000$9,500 $ 4,750 $ 4,750
$ 10,750
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INCOME BEFORE NOW (Part 1)
Part 2 Part 3 Part 4
Wages 0 9500 9500 9500 9500 Alimony 5000 5000 2000 6000 6000 TOTAL 5000
(Baseline) 14,500 11,500 15,500 15,500
MINUS BASELINE
5000 5000 5000 5000
EXCLUSION 9500 6500 10,500 9500
10,500 9500 x 50%
4750
EID Calculation Chart:Learning Activity 5-2
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Applying the EID Rules
• In this section, we’ll walk you step-by-step through an in-depth example of the complexities that can arise in the application of the EID rules.
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Challenges for PHA Management
• Since EID is a statutory requirement and a major source of rent errors, management must take seriously the responsibility of ensuring that staff can apply the EID rules correctly.
• Rectifying a failure to provide this benefit when a family is entitled to it can be costly for a PHA. So can providing excess subsidy!
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Challenges for PHA Staff
• Staff may be puzzled or confused by the results of correctly applying the EID rules such as families with these circumstances:– Family who has significant increase in earned
income without having any increase in rent – Family who has decreases in other income
with no equivalent decreases in rent
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Challenges for PHA Staff
• Other confusing areas– Explaining to families why their rent is going
up or down as a result of the EID rules– Difficulty tracking a family’s EID benefit as
time passes and family circumstances change
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Purpose of Effective Tracking System
• HCV participants must benefit only for the number of months for which they qualify
• PHA does not become liable for excess subsidy
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In-Depth Example
• Franklin Family– One member will become eligible for EID and
will progress through two 12 month exclusion periods
– Case study will help us track the two exclusion periods as well as the 4-year maximum benefit period
• Time is divided into 4 12-month blocks• See time lines (page 5-35)
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In-Depth Example
• Franklin Family Scenario (page 5-36)
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In-Depth Example
• For each scenario, we will follow these 3 steps:
1. Calculate the EID exclusion amount
2. Calculate the family member’s wages after exclusion
3. Complete Form HUD-50058 entries
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Part I, Step 1
A. Earned income of EID family member 8,450B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 11,050D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 6,370F. 50% exclusion during phase-in period, if applicable
(E x 0.50)N/A
Step 1: Calculate EID family member’s
exclusion amount.
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Part I, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 8,450
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 6,370
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)2,080
Step 2: Determine EID family member’s wages after exclusion.
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Part I, HUD 50058
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Part 2, Step 1
A. Earned income of EID family member 13,520B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 16,120D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 11,440F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
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Part 2, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 13,520
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 11,440
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)2,080
Step 2: Determine EID family member’s wages after exclusion.
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Part 2, HUD 50058
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Part 3, Step 1
A. Earned income of EID family member 10,140B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 12,740D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 8,060F. 50% exclusion during phase-in period, if applicable
(E x 0.50) N/A
Step 1: Calculate EID family member’s
exclusion amount.
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Part 3, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 8,060
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)2,080
Step 2: Determine EID family member’s wages after exclusion.
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Part 3, HUD 50058
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Part 4, Step 1
A. Earned income of EID family member 10,140B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 12,740D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 8,060F. 50% exclusion during phase-in period, if applicable
(E x 0.50)4,030
Step 1: Calculate EID family member’s
exclusion amount.
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Part 4, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 10,140
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 4,030
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)6,110
Step 2: Determine EID family member’s wages after exclusion.
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Part 4, HUD 50058
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Part 5, Step 1
A. Earned income of EID family member 0B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 2,600D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 0F. 50% exclusion during phase-in period, if applicable
(E x 0.50)0
Step 1: Calculate EID family member’s
exclusion amount.
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Part 5, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 0
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 0
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)0
Step 2: Determine EID family member’s wages after exclusion.
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Part 6: Annual Reexams
• For the Franklin family’s next 3 annual reexaminations, there is no change in family circumstances.– June 1, 2005– June 1, 2006– June 1, 2007
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Part 7, Step 1
A. Earned income of EID family member 17,680B. Other income of EID family member 2,600 C. Total annual income of EID family member (A + B) 20,280D. Prequalifying income of EID family member 4,680 E. Full exclusion (C - D, but no more than A) 15,600F. 50% exclusion during phase-in period, if applicable
(E x 0.50)7,800
Step 1: Calculate EID family member’s
exclusion amount.
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Part 7, Step 2
G. EID family member’s earnings (HUD-50058, 7d) 17,680
H. Exclusion (E or F, as applicable) (HUD-50058, 7e) 7,800
I. EID family member’s earned income after
exclusions (G – H) (HUD-50058, 7f)9,880
Step 1: Calculate EID family member’s
exclusion amount.
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Part 7, HUD 50058
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Part 7: After Exclusions End
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Chapter 5. Section 5.Assets and Asset Income
107
Assets and Asset Income
• Value of assets may affect family’s annual income
• PHA must:– Identify assets– Verify market value of asset– Convert from market to cash value
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Assets and Asset Income
• To determine cash value of asset, start with the fair market value. Then subtract:– Any expenses involved in converting assets
to cash:• Broker fees• Legal fees• Settlement costs• Penalty for early withdrawal
– Any money owed on the asset, such as the mortgage balance
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What Assets Include
• Savings and checking accounts– PHAs establish policies for determining
value of accounts– May elect to count current balances or
average balances for a given period (2 months, 6 months, etc.)
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What Assets Include
• Accessible amount of trusts available to family
• Stock, bonds, money market funds• Equity in real property, other capital
investments• Retirement savings accounts
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What Assets Include
• Contributions to company retirement/pension funds– Before retirement, count only amounts family
can withdraw without retiring or quitting– After retirement, count regular periodic
payments as income
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What Assets Include
• Assets held in the name of more than one person that allow unrestricted access
• Lump sum receipts which are retained and verifiable– Inheritances, capital gains, lottery winnings– Social security & SSI lump sum payments
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What Assets Include
• Personal property held as investment– gems, jewelry, – coin collections,
• Surrender value of life insurance policies
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Assets Disposed of For Less Than Fair Market Value
• Imputed Assets: Assets disposed of within two years prior examination or reexamination for less than fair market value
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Assets Disposed of For Less Than Fair Market Value
• Cash value of an imputed asset is the difference between the actual cash value of the asset and the amount received for itExample: Home market value =
$155,000– Fees incurred 5,000
Actual Cash value $150,000- Amount received 100,000
Imputed Cash Value $ 50,000
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Assets Disposed of For Less Than Fair Market Value
• PHA can establish a minimum threshold for counting assets disposed of for less than fair value
• Threshold of $1,000 would be reasonable
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Assets Disposed of For Less Than Fair Market Value
• Generally NOT considered to include those disposed of due to:– divorce or separation– bankruptcy– foreclosure
• PHA should develop applicant/participant certification form for verifying assets disposed of for less than fair market value
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Assets Disposed of For Less Than Fair Market Value
• Learning Activity 5-3: Assets disposed of for less than fair market value (page 5-50)
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Income from Assets• Market value of asset
is used to determine anticipated income from asset– Formula to determine anticipated income from interest bearing accounts:
Market value x interest rate = anticipated income
What is the market value of a $4,000 savings account?
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Income from Assets
• Learning Activity 5-4:
• Interest Income from Assets (page 5-52)
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Section 6: Assets
Edith 1 Savings 400 x .023 400
400 9028
09
9
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Imputed Asset Income
• Income that would be received from an asset if it were converted to cash and the cash were placed in a savings account earning a HUD-determined passbook rate.
• The cash value of an asset is used to determine the imputed income from the asset.
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Imputed Asset Income
• Remember, when calculating the cash value of an asset, PHAs must take into account the expenses involved in converting the asset to cash such as:– Penalties for early withdrawal– Broker or legal fees– Closing costs (for real estate)
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Imputed Asset Income
• Imputed asset income comes into play on the HUD 50058 only when the total cash value of all assets is greater than $5000.
125
Imputed Asset Income
• When total cash value of all assets is $5000 or less, use the actual income from assets
126
Imputed Asset Income
• If the total cash value of all assets exceeds $5,000 must use the greater of:– actual income from assets
– imputed income from assets (HUD passbook rate times total cash value of all assets)
127
Assets and Asset Income
• Learning Activity 5-5:
• Assets and Asset Income (page 5-57)
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Section 6: Assets
Edith 1 Savings 400
5920 129.0225
133133
9Edith 1 Stocks 6000-480 5520 120 6000 x.020
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What Assets Do Not Include
• Necessary items of personal property such as furniture and automobiles
• Assets not accessible to the family
• Interest in Indian Trust lands
• Value of a home currently being purchased with HCV homeownership assistance
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Asset Issues
• Staff should know that market value is used to calculate actual income on certificate of deposits and other instruments that carry a penalty for early withdrawal– Cash value only used to determine imputed
asset income only if total cash value of all assets exceeds $5000
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Asset Issues
• The actual anticipated income from a interest-bearing asset (savings account) is based on the interest rate actually paid by the bank or other institution where the account is located.– The HUD-determined passbook rate is not
used to determine actual income.– The HUD-determined passbook rate is used
only to determine imputed interest on assets totaling more than $5000.
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Asset Issues
• PHA staff should be reminded that:– All assets count, regardless of their value– Assets may have a cash value and produce no actual
income– There is no maximum asset limit for applicants or
participants
• PHA may not pass cost of asset verification to families– Bank verifications– Appraisals
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Chapter 5. Section 6.Utility Allowances
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Utility Allowances
• PHAs are required to establish and maintain Utility Allowance schedules (see CFR 982.517)
• A Utility Allowance is that amount approved by the PHA for reasonable monthly costs of local utility consumption in its area
• Cost of each utility must be stated separately– For different sizes/types of units
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Utility Allowances
• Schedule must be reviewed annually– Must be revised if any utility rate has changed
10% or more
• If family leases a unit smaller or larger than the Voucher size (called the family unit size), the PHA must use the utility allowance for actual unit size unit leased.– Regardless of voucher bedroom size
136
Utility Allowances
• Current utility allowance must be applied at reexaminations
• Common reasons for utility allowance errors in subsidy determinations:– PHA failure to review or revise utility
schedules as required– PHA staff failure to apply revised allowances
at reexaminations– Failure to compare RFTA, lease and HAPC
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Utility Allowances
• Two suggestions for avoiding errors:– Require the use of a checklist– Conduct quality control reviews
138
Chapter 5. Section 7. Payment Standards
139
Payment Standards
• Used to calculate total subsidy for the family
• PHA’s Payment Standard is maximum subsidy amount that the family may receive
• For details on establishing payment standards see Section 7 (page 5-61)
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Use of Payment Standard
• If a family’s unit (voucher) size is not the same as the size of the unit that the family selects, the PHA must use the lower of:– PS for family unit (voucher) size; or– PS for size of unit actually selected
141
Use of Payment Standard
• During a HAP Contract, changes in the payment standard must be handled as follows:– If the PHA has decreased the payment standard
during the term of the HAP contract, the PHA must use:
• The higher (old) payment standard at the first regular annual reexam
• The lower (new) payment standard at the second regular rexam (unless the payment standard has been increased in the interim)
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Use of Payment Standard
During a HAP Contract, if PHA has increased the PS:• Use the new, higher Payment Standard at the 1st regular
(annual) reexam after the Payment Standard increase• Do not use the higher payment standard for interim
reexams– Use PS in effect at last annual reexam
143
Use of Payment Standard
• If the family’s unit size changes during the term of the HAP contract, the PHA must use the payment standard for the new family unit size at the next annual reexam.– Regardless of whether the PHA has made
any changes in the PS schedule– Family unit size is Voucher size.
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Payment Standard Issues
• At times, PHA may not have up-to-date PS amounts available when processing annual reexams that will become effective at a later date. – Problem generally arises around the time
HUD publishes FMRs for the coming year (October 1 or thereabouts)
145
Payment Standard Issues• If PS increases between the time the PHA
completes a batch of reexams and the date the reexams become effective, PHA must re-calculate rents for those families or delay adoption of new schedule for reasonable period (as long as the current payment standard is within the basic range).
• Example: – Reexams processed in August for November effective
date– PHA increases PS effective November 1– PHA would re-process all November reexams using
higher PS unless adoption of new schedule was delayed
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Payment Standard Issues
• Common errors:– Wrong PS used when actual unit size is
smaller than family unit size (voucher size)– Failure to apply correct PS when change in
family size results in a different family unit (voucher) size
– Applying increased PS at interim reexams
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Learning Objective
• Understand and address those difficult aspects of rent calculation where errors are most likely to occur