Hi, @DianeW777,
Thanks so much for your help, after reading the IRS doc(Certain Medicaid Waiver Payments May Be Excludable From Income | Internal Revenue Service (irs.gov)), I think this Q13 describe the exact situation as my 1099-NEC, since I don't run any business as stated in Q14.
So my silly question is: how do I input this “Notice 2014-7” in turboTax, and did that mean I don't report the number in my 1099-NEC in turboTax at all.
Or, I can treat myself as a sole proprietor in a business of providing home care services, even though I don't actually own a business, and follow the answer in Q14 to cancel out the 1099-NEC income as business expense?
Thanks a lot!
Q13. I provide services under a state Medicaid Home and Community-Based Services waiver program. The agency that pays me for these services does not treat me as an employee, and I do not have a separate trade or business of providing these services. However, the agency reported the payments as income on Form 1099-MISC, Miscellaneous Income. How should I report to the Service that these payments are excludable from gross income?
A13. You should enter -0- on line 21 of Form 1040 if you have no other income reportable on line 21. If you have other income reportable on line 21, you should enter the amount of the other reportable income on line 21. You should write “Notice 2014-7” on the dotted line for line 21 on a paper return or enter “Notice 2014-7” on line 21 for an electronically filed return. Because the payments are excludable from income, and because you do not have a trade or business of providing these services, the payments are not self-employment income subject to self-employment tax.
Q14. I am a sole proprietor in a business of providing home care services. In my business, I received payments that areexcludable from gross income under Notice 2014-7. However, I received a Form 1099-MISC, Miscellaneous Income, reporting these payments as income. How should I report to the Service that these payments are excludable from gross income?
A14. You should include the full amount of the payments reported to you on Form 1099-MISC as income on line 1 of Form 1040 (Schedule C). You should then report the excludable amount as an expense in Part V, and write “Notice 2014-7” next to that amount. Even though you are a sole proprietor, because the amounts are excludable from income, they are not self-employment income and are not subject to self-employment tax. For additional Q&As discussing the application of self-employment tax to family caregivers, follow this link: /Businesses/Small-Businesses-&-Self-Employed/Family-Caregivers-and-Self-Employment-Tax.
