Foster Care is non-taxable but if you did Respite Care it IS taxable and must be claimed.

The agency who we did foster respite care through in Washington State has not sent paperwork showing what we have been paid and when I asked, they seemed to be confused as to whether or not respite care income is taxable.  If it is taxable, shouldn't I be provided a form from the agency showing how much they paid us?

Yes, the payer should provide a tax form IF the income is taxable/tax-deductible for them.  Did the foster care recipient(s) live with you while you received the income?   @caengland   

Qualified foster care payments - From IRS 

Section 131(a) excludes qualified foster care payments from the gross income of a foster care provider.

Section 131(b)(1) defines a qualified foster care payment, in part, as any payment under a foster care program of a state or a political subdivision that is either:

• (1) paid to the foster care provider for caring for a qualified foster individual in the foster care provider’s home, or 
• (2) a difficulty of care payment.

Section 131(b)(2) defines a qualified foster individual as any individual who is living in a foster family home in which the individual was placed by an agency of a state or political subdivision or by a qualified foster care placement agency.

Section 131(b)(3) defines a qualified foster care placement agency, in part, as a placement agency that is licensed or certified for the foster care program of a state or political subdivision of a state.

Section 131(c) defines a difficulty of care payment as compensation to a foster care provider for the additional care required because the qualified foster individual has a physical, mental, or emotional handicap.   The provider must provide the care in the provider’s foster family home, a state must determine the need for this compensation, and the payor must designate the compensation for this purpose.  In the case of any foster home, difficulty of care payments are not excludable to the extent that the payments are for more than 10 qualified foster individuals who have not attained age 19 or 5 qualified foster individuals who have attained age 19. See § 131(c)(2).

Thanks for your response.

They just stayed with us during the respite period, which was anywhere from 2 days to 7 days (they didn't move in with us as they were living with foster parents, and we just provided respite care so their full time foster parents could have a break).

Payments for respite care may be taxable. See below for further details. 

The Washington State Agency should have withheld taxes and provided you with an information return if they paid for what was classified as respite care. If the foster parents made the payments, they should have provided an information return (W-2 or 1099).

According to the Washington State Department of Social and Health Services:

Payment for respite care is taxable income; providers will have taxes deducted from their earnings. Respite providers for foster parents licensed through DLR, will have taxes deducted in their payment received from DSHS. Persons providing respite for foster parents licensed through CPAs are paid directly by the private agency. Because DSHS maintains a contract with the CPA for its services, taxes for respite payments are deducted by DSHS before the funds are sent to the CPA for disbursement to the respite provider.

Each respite provider that is receiving payment must complete a W-9 tax form prior to providing care. Because each person’s tax status is different, the amount of tax deducted from their payment will vary.

IRS Publication 4694 states: Generally, payments you receive from the state or other eligible entity for providing care in your home to a foster child, perhaps your grandchild, are considered support for that child. These payments are not included in your income for federal tax purposes. However, if you receive payments to maintain space in your home for emergency foster care, you must include these payments as income for federal tax purposes.

IRS Information Letter INFO 2003-0061 states: 

In general, under § 61 of the Internal Revenue Code, gross income is all income from whatever source derived, including compensation for services.

Under § 131 certain foster care payments are excludable from the gross income of a taxpayer who provides foster care. This exclusion applies only to a taxpayer in whose foster family home a qualified foster placement agency places a qualified foster individual.

Generally, payments to a respite care provider are taxable as compensation for services under § 61.