May 2003Chapter 8: Case Study 2- Bennett1 HUD RHIIP Training Case Study 2: Bennett Family (Public Housing)

May 2003 Chapter 8: Case Study 2- Bennett 1

HUD RHIIP Training

Case Study 2: Bennett Family (Public Housing)


Bennett Case Study:Process Overview

• Topic presentation• Students complete case study

– Using Appendix C, File Review Checklist Worksheets

• Students review PHA’s HUD 50058• Students complete Appendix A, Tenant File

Review Checklist• Review correct checklist and HUD 50058


Bennett Case Study: Topics

• Annual Income– Self Employment– Imputed Welfare Income

• Imputed Welfare Income and (PH) MEID


Bennett Case Study: Topics

• Rent Calculation – Mixed family rent calculation

• Income based rent• Flat rent


Self-employment


Self-employment Income

• Treat as operation of a business/profession– Count net income



• Net income is – gross income less

• business expenses• interest on loans• depreciation

– Use straight line depreciation – see IRS guidelines

• withdrawal of cash/assets for reimbursement of family’s investments in the operation



• Do not deduct expenses for expansion or capital improvements



• Estimating anticipated income for self-employment may be difficult– Family may not keep formal records

• Family could maintain a monthly log of income and expenses for PHA– Use average over a period of 3 or more

months



• Interim recertifications may be required to reflect changing circumstances


Self-employment Income: Example

• Mary James sells beauty products door-to-door, on consignment

• November/December are biggest sales months but has sales all year long

• Has no formal records of income except IRS form 1040

• What should be used to determine annual income?


Self-employment Income: Example

• Answer: With no other information available, use the income reflected on her form 1040 as her annual income.


Self-employment Income:

• Other IRS Forms applicable to self-employment – Schedule C: Profit or Loss From Business– Schedule E: Supplemental Income and Loss– Schedule F: Profit or Loss from Farming

• Copies under reference tabs


IRS Resources – Other IRS Forms

• Form 4506: Request for Copy/Transcript of Tax Form– Can order tax return transcript 1040 series during

current calendar year and 3 years prior– Verification of nonfiling– Form W-2 Information– Copy of tax forms and all attachments including W-2

• $23 charge for each tax year

• Requested items will be sent to taxpayer



• Form 8821: Tax Information Authorization– Can be sent to Appointee (PHA)



• IRS Letter 1722– Tax account listing – Shows

• Filing status• Exemptions claimed• Adjusted gross income• Taxable income• Taxes paid

– Family can obtain by calling 1-800-829-1040


Imputed Welfare


Imputed Welfare Income

• Congress has now linked welfare reform to housing reform



• QHWRA established two situations where PHAs cannot reduce rents when families have welfare benefits reduced– Welfare fraud– Non-compliance with economic self-

sufficiency requirements



• Instead of reducing rent, PHA must “impute” welfare income equal to the amount of reduction in welfare benefits

• Only applies to families who are required to participate in economic self-sufficiency activities in order to receive full welfare benefits



• Does not apply if reason for welfare benefit reduction is:– Expiration of lifetime or other time limits

on welfare benefits– Economic self-sufficiency requirements

completed but family member cannot find job



• Does not apply if reason for welfare benefit reduction is…– Noncompliance with a non self-

sufficiency requirement– Because of an earlier inadvertent

overpayment



• Verification must be obtained from welfare agency of:– Amount of the welfare reduction– Term of the reduction– Reason for the reduction– Any subsequent changes in the reduction



• PHA must rely on information provided by welfare agency



• After verification the PHA is required to compute rent exactly as if the welfare benefit reduction had not occurred, until:– Reduction ceases, or– Resident obtains some additional type of

income



• If the family has imputed welfare benefits and their income from other sources then increases:– the increase offsets (takes the place of) the

imputed welfare income instead of simply being added to the family’s overall income

– when new income equals or exceeds imputed welfare benefits, imputed welfare is no longer counted


Imputed Welfare Income: Example

• Monica Smith’s welfare grant was reduced due to failure to comply with economic self-sufficiency, as verified by welfare agency

• Original grant was $500 but is now reduced to $300, for 12 months




• What is her monthly– Imputed Welfare Benefit– Total Income – counted for rent calculation?




• What is her monthly:– Imputed Welfare Benefit $200$200– Total Income counted

for rent calculation $500$500




• Two months later, Monica gets a job earning $150 per month

• How will her income be reported?




• Two months later, Monica gets a job earning $150 per month

• How will her income be reported?

–$300 Welfare cash payment$300 Welfare cash payment–$150 Employment income$150 Employment income–$ 50 Imputed Welfare Benefit$ 50 Imputed Welfare Benefit




• Now, Monica earnings increase to $250/mo

• How will her income now be reported?



Original grant was $500 but is now reduced to $300, for 12 months

• Now, Monica earnings increase to $250/mo• How will her income now be reported?

–$300 Welfare cash payment$300 Welfare cash payment–$250 Employment income$250 Employment income–$ 0 Imputed Welfare Benefit$ 0 Imputed Welfare Benefit



Monica’s total monthly income will increase to $550 because the income increase from employment that occurred after the welfare benefit reduction is greater than the amount of the welfare benefit reduction.



• A family who has an imputed welfare benefit reduction will never pay less than the rent that was based on the former welfare income



• If the welfare benefit reduction occurred prior to admission, there is no imputed welfare benefit – the PHA counts only the amount of actual cash benefits received


Imputed Welfare and MEID

• Families who have welfare income imputed may qualify for the earned income disallowance when they go to work

• Include the imputed welfare income as part of the baseline income (prior to the earned income increase)


Imputed Welfare and MEID - Example

• Evelyn Jones’s full monthly welfare benefit was $500 ($6,000/yr) prior to $150 sanction

• Evelyn found a job paying $1500 per mo and she qualifies for the earned income disallowance

How is Evelyn’s income calculated?


Imputed Welfare and MEID – Example Answer

• Answer: The $150 imputed welfare income plus the $350 welfare cash payment make up Monica’s $500 baseline for the disallowance ($6,000 annually)


Imputed Welfare and MEID: Answer

• If welfare benefits end after employment:– count first $500 of employment income– exclude the remaining $1000 as the

disallowance during full exclusion period ($1,000 is the incremental increase)


Welfare Benefits End After Employment


Answer continued

• If welfare (and sanction) continue after employment:– Count $350 welfare plus $150 of

employment income (which offsets $150 imputed welfare income), keeping pre-employment income counted at $500, and…


Answer continued

• If welfare (and sanction) continue after employment…– Exclude remaining $1350/mo

employment income as the disallowance during full exclusion period


Welfare & Sanction Continue After Employment


Mixed FamilyRent Calculation


Mixed Family Rent Calculation

• Mixed families are those families comprised of some eligible family members and some ineligible family members


Mixed Family Rent Calculation

• Eligible family members may be:– Citizens, including naturalized citizens– Nationals (owe permanent allegiance to

USA)– Noncitizens who have eligible

immigration status


Mixed Families

• Ineligible family members include:– Noncitizen students on a student visa,

and their noncitizen family members– Family members choosing not to contend

their citizenship status (noncontending members)


Mixed Families

• The number of ineligible family members will determine the proration of rent


Prorated Rent Calculation (PH)

• Step 1: – Determine TTP as you normally would

• Step 2: – Subtract TTP from PHA’s Public Housing

maximum rent to get maximum subsidy (if all members were eligible) CFR 5.520



• Step 3: – Divide maximum subsidy by number of family

members to get “member maximum subsidy”• Step 4:

– Multiply member maximum subsidy by number of eligible family members (results in eligible subsidy)



• Step 5: – Subtract eligible subsidy from PH maximum

rent to get prorated TTP• Step 6:

– Subtract Utility Allowance from prorated TTP to get the Tenant Rent for a mixed family


Prorated Rent Calculation: Example (PH)

• Jones family has 6 members. – Four are eligible citizens– Two are noncontending members– PHA’s PH maximum rent is $600– Family’s TTP is $250– Utility Allowance is $50



Public Housing Maximum Rent $600

Minus TTP - 250

Family Maximum Subsidy = 350

Family Maximum Subsidy $350

Divided by total family members / 6

Equals Member Maximum Subsidy = 58.33



Member Maximum Subsidy (before rounding) $ 58.33

Times number of eligible familymembers x 4

Equals Eligible Subsidy = $ 233



Public Housing Maximum Rent $600Minus Eligible Subsidy - 233Equals Revised TTP = $367Minus Utility Allowance - 50Equals Prorated Tenant Rent = $317• The Jones family will pay $117 more in rent (317-200)

due to the presence of two ineligible members.


Prorated Flat Rent (PH)

• If a mixed family requests flat rent instead of income based rent and the flat rent is less than the Public Housing maximum rent, then the flat rent needs to be prorated (unlikely)

• Formula found in Appendix 3 of form HUD-50058 Instruction Booklet


Prorated Flat Rent (PH)

• First compare the unit Flat Rent with the PHA maximum rent. – If maximum rent is less than or equal to

flat rent, do not prorate flat rent– If maximum rent is greater than flat rent,

must follow the steps in Appendix 3


Mixed Family Flat Rent > Maximum RentExample 1

• Mary Jones, a mixed family, asks for Flat Rent– Flat Rent is $700– PHA Maximum Rent is $500

• Since Flat Rent is greater than Maximum Rent, use Flat Rent with no proration


Mixed Family Flat Rent < Maximum RentExample 2

• Johnny James, a mixed family, asks for Flat Rent– Flat Rent is $550– PHA Maximum Rent is $600– Total number in family = 5– Total number eligible = 4

• Since Maximum Rent is greater than Flat Rent, proceed with proration of Flat Rent


Mixed Family Flat Rent: Example 2

• Maximum Rent $ 600• Minus Flat Rent - 550• Equals Family Maximum Subsidy =$ 50• Maximum Family Subsidy $ 50• Divided by total number in family / 5• Equals = 10• Times total number eligible x 4• Equals Eligible Subsidy =$40


Mixed Family Flat Rent: Example 2

PHA Maximum Rent $ 600Minus Eligible Subsidy - 40Equals Prorated Flat Rent $ 560• The James family will pay $10 more in flat

rent (560-550) due to the presence of one ineligible family member.


Monitoring Review



Ground Rules– Objective: complete case study– Time: Approximately 1 hour– Work individuallly– Trainer and trainer aides will assist if needed– Please keep noise volume to a minimum



Instructions for Part 11. Review PHA file data and complete

Appendix C (Tenant file review worksheets)



• Resources for case study – Case information begins page 8-13– Verifications (pg 8-23)– Appendix C, Tenant File Review Checklist

Worksheets (pg 8-41)– Cubzide PHA Policies/Schedules (pg 6-5)



Instructions for Part 21. Review PHA’s HUD 50058 (Handout)

2. Complete Appendix A, Tenant File Review Checklist to record discrepancies


Annual Income Table Answer


Dwelling Unit/ Utility AllowanceWorksheet

• What did you put for the Total Utility Allowance?


Adjusted Income Worksheet Answer


Adjusted Income Answer








Total Tenant PaymentAnswer


Prorated TTP and Tenant Rent - Answer


Review Appendix A

• Discussion


Thinking Points

• PH Maximum Rent– Has the PHA established PH Maximum Rent

using HUD formula?• Third party verification

– Has the PHA documented why it was unable to obtain third party verification if review of documents was used?


Thinking Points

• Imputed welfare – – Has PHA received all needed information

from welfare?– Does PHA correctly offset amount of

imputed welfare income when additional amounts come into the family after sanction begins?

Documents

May 2003Chapter 8: Case Study 2- Bennett1 HUD RHIIP Training Case Study 2: Bennett Family (Public Housing)