A Little Confused about Notice 2014-7 and Self-employment (1099 Form)

[ericag9218-gmail]

I wanted to know that if filing Notice 2014-7 affects my return/refund amount? Also, since I receive a 1099 and I file self-employed, does filing Notice 2014-7 change the fact that I would file self-employed?

[JandKit]

Hi Ericag9218-gmail,

thank you for this question. IRS Notice 2014-7, called Difficulty of care payments are excluded from income. The exclusion covers income earned through the provision of personal care services when the Medicaid client and Provider live in the same household. As written, the IRS Notice only excludes payments for personal care services provided under Home and Community Based Services (HCBS) waiver programs, such as COPES, that operate under section 1915(c) of the Social Security Act. 

This income is not considered self-employed income and is not subject to any self-employment taxes!

[KochuK]

Hi ericag9218-gmail, thanks for posting a event question today.

Notice 2014-7 provides guidance on the federal income tax treatment of certain payments to individual care providers for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in section 1915(c) of the Social Security Act (Medicaid Waiver payments).

Please see below link Questions 13, 14 and 20 that reference Form 1099-Misc payment.

Certain Medicaid Waiver Payments May Be Excludable From Income

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

Hope that helps.

Thank you,

Kitty

[ericag9218-gmail]

Okay, so since it not considered self-employed income and is not subject to any self-employment taxes do I still file it? And if this is my only income at the moment would it decrease the amount I receive back on my tax refund with 2 dependents (elderly age 70 and a child age 11)?

[KochuK]

If you receive a Form 1099-Misc, you should report it on your income tax return, but the amount may not taxable depending on your circumstance per the rule of 2014-7.  You can enter  a corresponding negative amount to zero it out on your income tax return.

In general, if you have no earned income, such as W-2 nor net income from self employment, the other dependent credit (elderly age 70) and child tax credit (child age 11) is NOT refundable.

Thank you.