W-2 Income for Disabled Child Support no longer Taxable Feb 2015

[Wes Yarnall]

I have a client with a disabled son that receives income from the state for the care of her disabled son. The husband just called to say that he learned that this income is now considered non taxable due to a change in Feb of 2015 (maybe only for Social Security calculations). He also said that the change allowed going back three years and deleting the income. Does anyone
have any info on this?

[David1980]

See Revenue Notice 2014-7 which provides that certain payments received by an individual care provider under a state Medicare Home and Community-Based Waiver (Medicaid waiver) program are excludable.

[Stringbean]

If its from SSA...

If it is social security disability, I have always thought such payments were tax-exempt, not only for the child, but for the parent as well.

However, these payments could be substantial enough to deny the exemption deduction for the parent. Lost a client because of this once, Momma had a W-2 for $21,000 and no other income but $7000 for her daughter's SSI. Had 6 other kids. No way could I claim she was furnishing more than 50% of support.

[TaxGuyBill]

I think that David is right, and the client is referring to the Medicaid waiver program.

https://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income

[dtlee]

If it is social security disability, I have always thought such payments were tax-exempt, not only for the child, but for the parent as well.

However, these payments could be substantial enough to deny the exemption deduction for the parent. Lost a client because of this once, Momma had a W-2 for $21,000 and no other income but $7000 for her daughter's SSI. Had 6 other kids. No way could I claim she was furnishing more than 50% of support.

The original poster is likely talking about Medicaid Waiver Payments for care of another individual.

Your post, though, seems to equate Social Security Disability Insurance (SSDI) with Supplemental Security Income (SSI). They are not the same at all. The former is based on earnings and quarters as a worker and the latter being a form of Federal welfare.

When an individual receives SSDI and uses the funds for their own support, that individual is considered to be using their own funds towards their own support. If a person receives SSDI of $7,000 in your example I would likely agree. These are not purely tax-exempt but are taxable based on the same rules as for other Social Security Retirement Benefits.

When an individual receives SSI and uses the funds for their own support (which I believe they are required to do), that individual is being supported by someone other than themselves (i.e., the State) and thus in your example would not be supporting herself. Such payments are tax-exempt.

Social Security Disability Insurance is reported on a 1099-SSA just like any other Social Security distribution and would have the individual's name and social security number on the form. SSI is not reported this way.

I apologize for the hijack of this thread.

I agree with David on his reference to Notice 2014-7.

[TAXNJ]

4-25-15. Ssi for child

I have a client with a disabled son that receives income from the state for the care of her disabled son. The husband just called to say that he learned that this income is now considered non taxable due to a change in Feb of 2015 (maybe only for Social Security calculations). He also said that the change allowed going back three years and deleting the income. Does anyone
have any info on this?

Also see prior post 4-25-15. SSI FOR CHILD

[JON]

Exempt for services provided in the home by the relative. I believe in MN the they are still saying social security is being withheld.