The income you receive from the trust as a caregiver for a family member is taxable income, but it is not subject to self-employment tax. You should report the income on line 21 of Form 1040. Please
go to Federal Taxes>Wages &
Income>Less Common Income>Miscellaneous Income>Other Reportable
Income to report this income.
However, the income is not exempt from income under IRS Notice 2014-7, which addressed payments made by state Medicaid programs. That Notice is based on Section 131 of the Internal Revenue Code, which generally exempts from gross income payments received as "qualified foster care payments." These payments must be made for the care of a "qualified foster individual." The Code defines a qualified foster individual as:
The term “qualified foster individual” means any individual who is living in a foster family home in which such individual was placed by—
(A) an agency of a State or political subdivision thereof, or
(B) a qualified foster care placement agency.
Because your uncle was not placed in your care by a government agency or qualified foster care placement agency, he is not a "qualified foster individual." As such, your pay does not meet the definition of "qualified foster care payments" under the Internal Revenue Code.
The income cannot be excluded from your gross income. I apologize if you were misinformed by a TurboTax employee.
