Medicaid and Federal income tax

[sdarave]

Client receives a form 1099Misc, with income reported in box 6 (medical and healthcare payments). Income is reported on sch C with the total amount offset in box 27a with the statement "24 hour in home care certified family Home". Audit issue? The income is for a person not related who is disabled.

[TaxGuyBill]

Can you clarify why you are treating it as not taxable?

Are you saying the income should belong to somebody else (the disabled person?)? Or are the payments properly made to the taxpayer, but are through a Medicaid Waiver program that qualifies for IRS Notice 2014-7? Something else?

[sdarave]

I believe my client does qualify for the exclusion under IRS Notice 2014-7. Thank you TaxGuyBill!! Your depth of knowledge is amazing, and I thank you for being willing to share!

[TaxGuyBill]

You first should verify that the payments are from a "Medicaid Waiver" program, and that your client lives with the disabled person. The client can ask the Social Worker if the payments are from a Medicaid Waiver program that qualifies for IRS Notice 2014-7 (the social worker should immediately know what they are talking about).

Assuming it does qualify, then call the deduction "Notice 2014-7". See #13 and #14 in the link below.

https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

[mar14]

There were corrected 1099s issued removing payment from medical line. Depending on software - some have a box to check for the Medicaid Waiver on the Sch C