INCOME VERIFICATION AND DEDUCTIONS
DEFINITION OF ANNUAL INCOME
HUD defines Annual Income as all amounts, monetary or not, which: go to, or on behalf of, the family head or spouse (even if temporarily absent) or to any other family member; or are anticipated to be received from a source outside the family during the 12-month period following admission or annual reexamination effective date; and which are not specifically excluded. Annual income also means amounts derived (during the 12- month period) from assets to which any member of the family has access. For HUD’s complete definition of Annual Income, including a listing of all income exclusions, see 24CFR5.609.
HOW THE HOUSING AUTHORITY VERIFIES INCOME – OVERVIEW
As a condition of housing assistance under the program, the Housing Authority requires the family to complete a detailed Initial Application and an annual Personal and Financial Statement listing all sources of income, assets, and other information needed to determine the appropriate level of subsidy. Additionally, family members must sign a consent form, authorizing any financial institution, employer, Federal, State or local agency, etc. to release information to the Housing Authority.
HUD requires that all income, assets, and other family information must be verified according to the following levels of priority.
Upfront Income Verification: Upfront Income Verification is the verification of income, before or during a family re-examination, through an independent source that systemically and uniformly maintains income information in computerized form for a large number of individuals. In an effort to minimize HAP overpayments due to tenant misreporting and non-reporting of income, HUD has launched an upfront income verification tool called Enterprise Income Verification (EIV). EIV contains data regarding wages and benefits received by all program participants with valid Social Security Numbers.
Written Third Party Verification (Tenant Documents): Written third party verification (tenant documents) are current, original documents generated by a third party source.
Written Third Party Verification Form (HA Form): In cases where the tenant is unable to provide documentation, or where the tenant provided documentation is not sufficient, the Housing Authority will contact the income source directly, in writing, to obtain the verification information.
Verbal Third Party Verification: If the income source does not respond to a written request for information or provides incomplete or unclear information, the Housing Authority staff may contact the source by phone to request clarification on incomplete information.
Tenant Declaration (Self Certification): If no other verification is available, staff will note the reason in the file and require the tenant to sign an affidavit declaring their income.
INFORMATION REGARDING VERIFICATION OF SPECIFIC INCOME TYPE
The following is a list of the most common income types, as well as other items that the Housing Authority documents, including details associated with how these items are verified. This is not a comprehensive list, as new income sources and other related items are added frequently. Items presented below are listed in alphabetical order.
Annual contributions / gifts – HUD requires that regular and ongoing contributions and gifts should be counted towards annual income. However, gifts or contributions that occur annually (such as Christmas or birthday gifts) are not considered regular or ongoing because they occur only once during the re-examination reporting period of one year. Therefore, such contributions and gifts are to be excluded if they are less than $1,000 per household.
Assets: For current program participants at annual re-examination only, the Housing Authority will accept tenant self-certification of assets on the Personal and Financial Statement if total household assets are reported to be less than $5,000. For applicants in the eligibility process, and for current program participants with $5,000 or more in total household assets, the Housing Authority will collect current tenant provided documents, such as bank statements.
Cash on hand – Occasionally Tenants report their cash on hand (as requested on the Personal and Financial Statement). Cash amounts less than $1,000 per household will not be counted as an asset. However, any amount of cash that is greater than or equal to $1,000 per household will be counted as an asset.
Child Care Expense Deductions: The Housing Authority must first verify that child care expenses are used to enable a family member to work, actively seek employment, or further his/her education. For instance, the childcare must be provided during the hours of work, education, etc. when there is no other activity (such as school) for the child.
Community Service Requirement: For verification of participation in required community service for public housing tenants, a timesheet signed by the agency but provided by the family is acceptable. For verification that a family member is exempt from performing community service, staff must obtain the highest level of thirdparty verification possible in accordance with this procedure, except for those exemptions that are due to permanent reasons such as age or permanent disability which have already been verified and documented.
Disability: If a tenant receives SSI, the verification of the SSI payment is acceptable verification of the disability. If the tenant does not receive SSI, verification of disability, depending on the individual’s circumstances, will be requested from a doctor, other health care professional or a social worker, with medical or professional knowledge of the person’s disability. If such verification is not available, the Authority may consider other forms of verification on a case-by-case basis.
Full Time Student Status: Full time student status must be verified using current tenant documents provided either by the household or by the school. Full time student status will be annually.
Citizenship and Immigration Status: All program participants admitted to the program must sign a statement indicating whether they are a US citizen, a legal resident, or whether they do not contend to have eligible citizenship status (and will therefore receive prorated assistance). US citizens will be asked to provide proof of citizenship, which may include either a birth certificate, passport, or naturalization certificate. Non-citizens who are under the age of 62 years old must provide documentation of eligible immigration status (which is then verified in the E-verify SAVE system).
Medical Expense and Disability Assistance Expense Deduction: The Department of Health and Human Services has developed Federal privacy standards to protect patients’ medical records and other health information provided to health plans, doctors, hospitals, and other health care providers as of April 14, 2003. These standards are part of the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The privacy requirements under HIPAA have a significant impact on how PHAs verify disability status, medical expenses, and disability assistance expenses. HIPAA requires that patients sign a specific authorization before a covered entity can release their medical information to a third party for purposes not related to the patient’s health care.
The Housing Authority appreciates the statement in the Verification Guidance acknowledging that “with increasing privacy law requirements, PHAs may have difficulty in verifying” medical and disability assistance expenses. In light of these considerable difficulties, the Housing Authority has determined that the best way to ensure the validity of medical and disability assistance expense information, while simultaneously protecting the confidentiality of our applicants and participants and complying with HIPAA, is a reliance on applicant / participant self-certification. To receive the medical expense deduction, tenants must complete the medical expense verification forms provided in the medical expense packet. However, if a program participant reports medical expenses in excess of $3,000, Housing Authority staff will attempt to further validate the expenses in a manner that does not violate the confidentiality of the program participant.
Photo Identification: All adult household members will be asked to provide a government issued photo identification at the initial interview, before being added to the household, or at the annual re-examination following an existing household member’s eighteenth birthday. Photo identification may consist of a passport, driver’s license, state issued identification card, military identification card or a student identification card. Photo identification must always be presented in person, rather than by mail.
Seasonal Income: If a participant is employed in an occupation that is cyclical (that increases or decreases at the same time each year such as farm workers, teachers and construction workers) all income expected to be received during the year must be annualized. If the Housing Authority determines that past income is the best predictor of future income, historical data may be used to project annual income.
Self-Employment: All self-employed tenants and applicants will be asked to provide a complete copy of their most recent tax return (including Schedule C and Schedule SE if applicable). Additionally, all self-employed tenants and applicants will be asked to complete the self-employment certification form, and to sign form IRS 4506-T.
Social Security (SS) / Supplemental Security Income (SSI): The Housing Authority is required to use the HUD EIV system to obtain up-front verification of Social Security and SSI benefits for current program participants. If the amount shown on EIV does not match the amount provided on a current original benefits letter, the amount in the benefits letter will be used. If no current original benefits letter has been provided, but EIV matches the amount the tenant has reported through the Personal and Financial Statement, EIV may be used without collecting tenant documents. However, if the amount reflected on the PFS does not match EIV and the tenant has not supplied an original benefits letter, staff will either obtain an original benefits letter or will contact the tenant by phone to provide the tenant an opportunity to dispute the information in EIV. If the tenant does not dispute the information in EIV, staff will document the phone call and may use the data in EIV. If the tenant does dispute EIV, an original benefits letter must be obtained. Additionally, original benefits letters will be used to verify the Social Security and SSI benefits of applicants and other individuals who are not in the EIV system.
Social Security Numbers: All applicants, regardless of age, must disclose a valid Social Security Number and provide the required documentation at the time of their initial eligibility determination.
Wages: The Housing Authority is required to use the HUD EIV system, along with tenant provided documentation (such as current consecutive paystubs), to obtain verification of wages.
WHAT KIND OF INCOME SHOULD I REPORT TO THE HOUSING AUTHORITY:
- First, you MUST report ALL income that anyone in your family receives, and ALL assets that anyone in your family has.
- The Housing Authority reviews the information and requires you to provide documentation to verify all of your income and assets.
- Some types of income or assets may not be included in your rent calculation, but you are still required to report them.
You are required to report all income to us, even if you think we already know about it, or even if you think it “doesn’t count” for our programs. This includes, but is not limited to:
- Wages, salary, and tips
- Welfare, Social Security, and other benefits, even if the benefits are intended for a child.
- Child support, alimony, and other support from friends or family, including someone who pays bills, buys groceries, or provides other non-cash assistance
- Financial aid and student loans
- Self-employment income and work for cash, including side jobs like yard care, child care, selling merchandise at the flea market, etc.
- Workers compensation, unemployment, disability payments, etc.
WHAT KIND OF ASSETS SHOULD I REPORT?
You must report all assets owned by anyone in your family to the Housing Authority.
Generally, the value of the asset does not count as income. Only the income (such as interest) produced by the asset will count. If the asset does not produce any income, like money in a non-interest bearing checking account, the Housing Authority will use an assumed interest rate to estimate income.
Assets you must report include, but are not limited to:
- Bank accounts
- Pension and retirement accounts
- Real estate and other property
- Trusts, including special needs trusts
- Settlements, inheritance, and other lump sum cash awards
- Ownership in a business or partnership
HOW WILL YOU VERIFY THE INCOME I REPORT?
We will require that you provide documentation of all of your income and assets. Most documentation must be in the form of original documents, so make photo copies to keep for your records. Required documents include pay stubs, bank statements, benefits letters, tax returns, etc. You will be given a specific list of the type of documents needed.
We will also obtain direct verification from an online database maintained by HUD, called EIV. This database includes income and benefit information about you and your household. We will use the database to confirm the information you have provided to us. For more information about EIV, see the brochure called “What You Should Know About EIV” available at the Housing Authority office and website.
Finally, if we still need more information we may contact an employer, bank, agency, etc. directly and ask them to fill out a form verifying your income or assets and return that form directly to us.
HOW DO I DOCUMENT SELF-EMPLOYMENT OR CASH INCOME?
If you are self-employed, work for cash, or receive money or other support from friends or family, you must still document this income. Visit the Client Forms page to download the Statement of Recorded Business Income and Expenses listed under “Self-Employment/ Business Income”
- If you have received income from self-employment for over a year, provide the Schedule C from your tax filings and an income and expense statement or use our Self-Employment Verification Form.
- Keep a written log of cash received, including dates, amounts, and who provided the cash.
- Show bank statements that document that cash was deposited.
- Keep records throughout the entire year, and be prepared to provide this information to the Housing Authority annually.
- Provide names and contact information for the persons who provided the income to you. We may contact them directly for verification.
WHAT HAPPENS IF SOMEONE IN MY FAMILY FAILS TO REPORT THEIR INCOME OR ASSETS?
The head of household is responsible for making sure that everyone in the family fully reports their income and assets.
Failure to report this information, as well as any changes, can result in your family being required to repay subsidy, and/or being terminated from the program, among other penalties. See the Program Fraud Q&A for more information.
HOW OFTEN IS INCOME RECERTIFIED AND HOW TO REPORT AN INTERIM CHANGE?
The statute governing tenant income eligibility states that family income must be reviewed upon selection for assistance and at least annually thereafter. HUD regulations require annual recertification of tenant income and rent and give guidance regarding interim recertification (changes to income/ family composition that happen outside of the annual recertification period.
If a family experiences a change in income or family composition, mid-year or outside of their scheduled annual recertification, the family must report it by completing the Interim Change Form available of the client forms page. Verification of the income change must be attached to the Interim Change form. If the family is requesting to add a household member, the person is not permitted to move into the unit until the additional member is approved by the Housing Authority.
HOW IS MY RENT AMOUNT DETERMINED?
Families receiving HUD rental assistance are required to contribute toward their rent. The subsidy the family receives then generally makes up the difference between the tenant contribution toward rent and the actual cost of the housing (rent and utilities). Families’ contributions are statutorily set as the greatest of
- 30% of a family’s monthly adjusted income,
- $50 Minimum Rent
If a family participating in the Section 8 HCV program chooses to live in a unit for which their minimum tenant contribution plus their allowable subsidy are not sufficient to fully cover the rent, the family may choose to pay the difference, as long as their total contribution does not exceed 40% of their income in the first year (although the family may choose to pay more than 40% in subsequent years).
An easy way to estimate the family portion of the rent is to add the gross amount of all income sources. Once you find the monthly gross income, multiply that number by .3
The family portion of the rent will be lower than that number if the family is responsible for utilities, and can be higher than that number if the family is living in a unit that is larger than their voucher size.
WHEN WILL MY RENT CHANGE?
Annual Recertifications take place annually. The recertification appointment takes place about 4 months prior to the effective date of the rent change to allow for collection of third party verification and notice. Notice of the rent amounts will be mailed at least 30 days prior to the effective date unless the tenant caused the delays to processing (did not provide required verification). The tenant is required to report all change in income and family composition between the date of the Annual Recertification Meeting and the effective date of the Annual Recertification.
Interim Recertification takes place when there is a change to the family income/ family composition that requires a rent change in a month other than the effective date of the Annual Recertification. In the case of decreases in income, which generally cause a decrease to the family portion of the rent, the family must provide the completed Report of Interim Change as well as all verification 2 weeks prior to the end of the month in order to have the change be effective on the 1st of the following month.
Rent Adjustments notices issued by the landlord must be given 60 days prior to the effective date of the requested change. Please forward any notices issued by your landlord to the Housing Authority. If the Rent Adjustment is approved by the Housing Authority and the change causes an increase to the family portion of the rent, the family will be given at least 30 days notice. Only families living in a unit that is larger than their voucher size will see increases to the family portion of the rent caused by approved Rent Adjustments—Rent Reasonabless examinations compare units of the same size, the family is responsible for amounts of contract rent which exceed the families Payment Standard.
WHAT ARE UTILITY ALLOWANCES?
In cases where utility costs (e.g., natural gas, electricity, other heat sources, water, sewer, and garbage) are not included in rent—meaning utilities are tenant-paid—tenants are provided with a utility allowance. A utility allowance is meant to cover the approximate cost of tenant-paid utilities, based on a utility allowance schedule developed by the PHA. Utility allowances are deducted from a tenant’s monthly rental contribution, or, in the case where a utility allowance exceeds a tenant’s monthly rental contribution, a utility reimbursement is paid to the tenant.