pmt received from county for care of disabled

[Bill Tubbs]

Client (age 20) lives in a separate residence from her folks and 13-yr-old sister; the 13-yo is disabled. The 13-yo spent a couple weeks at client's home; for which the client received about $2000 from the county for taking care of her. A W-2 arrived for that dollar amount (boxes 3-6 were $0; box 1 = $2000).

I thought I heard that care like this was tax free income? Is income from the county for care of a disabled person ever tax free? Does it matter if the disabled person is a close relative? Or am I just hallucinating again?

(yes, I couldn't sleep so I figured I might as well work on a few returns)

Thanks,
Bill

[gkaiseril]

All Inocme is Taxable

I have not heard nor read anything about payments for care, services, being non-taxable if they came from the federal, state, or other agency.

The state of Illinois, has paid some welfare parents to take care of their own children and send them a 1099-Misc. So they have some earned income, but owe income and self employment tax.

Now paying on a W-2 with no Fica or Medicare taxes taken out is rare. The only situation I can think of that would have this situation is that the county has elected not to be covered by SSA benefits.

[taxea]

why didn't the client know this going in? If she was filed out a W-4 that should have been a clue. taxea

[erchess]

My Concern

is that the taxpayer may be required to pay SE Tax on the money in addition to income tax.

[Bill Tubbs]

what the client knew...

why didn't the client know this going in? If she was filed out a W-4 that should have been a clue. taxea

Whoa... client presented the W-2 to me presuming it was taxable income. It is I who thought I heard it might not be and figured I'd bounce the thought off this board. Doesn't look like it's tax free so I can now transmit the return (I had them sign the 8879 with it included in).

Thanks everyone who chimed in.
Bill