Certified Family Home non-taxable income stated in box 6 on form 1099-MISC

[B-JM]

I received non-taxable Certified Family Home payments for providing home care to my Down Syndrome sister who lives with me. I received a 1099-MISC income form with the amount stated in box 6.  Am I correct to say that since this income is not taxable, the 1099-MISC does not need to be reported on my tax return?

[SharonD007]

Why do you think the income isn't taxable?  If you received a tax form, you need to report it on your taxes.  Did you mean that the income isn't subject to self-employment tax?  Please clarify so we can help you.

[B-JM]

As I understand it:  Certified Family home payments made by the Idaho Division of Medicaid Department of Health are not taxed. Home care provided is not a business, so a Schedule C has no lines to accommodate this non-taxable income for a non-business government payment. Certified Family Homes do not have employees, and do not generate income. The only way to skip a Schedule C would be to not report the 1099-MISC.  This how I understand it, but I realize I could be totally wrong. This is why I ask the question. I cannot find any information on the Idaho State websites, nor on the IRS website.  

[DianeW777]

Yes, if this qualifies as medicaid waiver payments then you can report them as indicated in your other question and posted here for your convenience.

The Medicaid Waiver payments are allowed to be excluded from your income, but may be eligible for the earned income tax credit (EITC).  Use the instructions in the link below to enter your information.

• How do I exclude my medicaid wavier payments?  Click the type of document you have to see the steps.
  • Medicare Waiver Payments Exclusion
  • Notice 2014-7

[B-JM]

After some research and speaking with an H&R Block consultant, I learned that Certified Family Home payments from the Idaho Division of Medicaid Department of Health used for providing home care to my Down Syndrome sister who lives with me in my principle (only) residence qualifies as a Medicaid waiver program. Hence, these waiver payments are excludable income under Notice 2014-7:  "... an eligible individual receiving care in the individual care provider’s home under a Medicaid waiver program is a “qualified foster individual” under § 131(b)(2). ".  For the purposes of tax law, IRS Notice 2014-7 defines individuals in these circumstances as "qualified foster individuals".  As a result, this income is to be reported on Form 1040 Schedule 1. Because these waiver payments are classified as excludable income, you DO NOT report it as 1099-MISC income because that will classify it as taxable, and in Turbo Tax it requires all that complicated business information which in my situation does not exist!  Hence, because you will report these Medicaid waiver payments on Schedule 1, you DO NOT report it as 1099-MISC.  It is either the one, or the other, but never both.  Turns out H&R Block online Deluxe has this awesome feature that you can select: "I want to exclude Medicaid waiver payments under Notice 2014-7 ", and there you simply type in the amount found on the 1099-MISC document.  About 3 clicks and one single entry.  Too bad Turbo Tax does not make it that clear and simple ... [wink, wink].  The competition gotcha on that one 🙂

[DMarkM1]

You are correct certain Medicaid Waiver Payments are excludable from income as @DianeW777 noted earlier.  In TurboTax you would not enter the form 1099-Misc directly.  Instead use the steps in the link DianeW777 provided "How do I exclude medicaid waiver payments" (extracted below).  

"Less Common income>Miscellaneous Income>Other income not reported on a W2...>yes>continue to the page for the Medicaid waiver payment>enter the payment amount from the 1099-Misc"

This automatically puts the amount on form 1040 line 1d "Medicaid Waiver Payments..." so that it can be included in the earned income for any credit/deductions that require earned income.  This also automatically adds a negative (-) entry on schedule 1, line 8S (Nontaxable Medicaid Waiver Payment...) to subtract the amount from taxable income.  

So by entering one box amount the income is accounted for on your tax forms in the places designated by the IRS, is counted to claim the earned income (for any credits/deductions that require earned income) and then excluded from taxable income.