Notice 2014-7 filing and amending

[jens3]

I have an Adult Family Home. I am certified individual/sole proprietor. I have 1 client who lives with me. Started in 2016.  I recieved 1099-misc for years 2017, 2018, 2019. I recieved 1099- NEC for years 2020 and 2021. These payments come from a Medicaid Home and Community Based Services Waiver Program. I have used tubrotax Home and Business software to file since 2017 until now. I recently found out about Difficulty of Care Notice 2014-7, which excludes the payment from gross income.

Question #1 is: Do I qualify for this exclusion?

If I do, # 2 : Since I have been doing the business part, do I not do that this year and do just personal? OR do I continue with business and how and where to place the exclusion? 

# 3 :Since I have no reason to reduce my taxes do I just not do the buisness deduction or am I required to

# 4: I will need to know how to amend previous years.

[Vanessa A · Accepted solution]

1. It sounds like you do.  If you are living full-time with the disabled individual as both of your primary homes, then you would qualify.  If you have another home, then you would not qualify for the exclusion.

2. If you have had the same situation, you could go back and  Amend Your Return  to remove that income from your return for the prior years. 

3. Since you are not including that income, you would not include those expenses, therefore you would not need to file the business portion of your return.

4.  Amend Your Return click on the preceding link for instructions on how to amend your return.

[jens3]

Thank you for your reply

I do know I have to acknowledge the 1099's that were given and moving forward can ask to not get one

So to verify. I just drop the business part then place my 1099's in the personal part then minus as they are saying in other threads.

On the amended returns I do the same...drop the business part , place and substract the 1099 in the personal part

[ThomasM125]

You are correct, delete the business entry and report the 1099 income as other income along with a negative adjustment to other income to cancel out the income reported.

[jens3]

Thank you for your reply

Question

As I was entering State info came across homestead credit

Would the earnings from the 1099 need to be added back in for that as Disqualified Losses?

[DawnC]

Can you clarify what state are you filing?   

[jens3]

Wisconsin

[jens3]

Please reply to question above, thank you.

I am filing a Wisconsin State return

[DianeW777]

No.  Based on the information provided in the instructions for Wisconsin Schedule H, a net profit would be added back as a disqualifying loss and since you are actually eliminating this income under Notice 2014-7 it is not included.

• Homestead credit or farmland preservation credit from Schedule FC - A taxpayer who is amending to remove the Medicaid waiver payments from income should also amend homestead credit or farmland preservation credit if previously claimed. The amount of these payments is not included in household income for homestead or farmland preservation credit purposes.
  • WI Medicaid Waiver Payments FAQs

[cjmz96]

I  have a similar situation (using Deluxe). However when I enter the income under 1099-NEC, it shows as $0 under 1099-MISC and Other Common Income section and it forces me to create a Schedule C and list it as business income. Which leads to a litany of questions. I understand the negative offset in the Misc Income section but should I be entering the income in a different section to avoid the Schedule C?

[JamesG1]

The income should not be reported under Schedule C.  Use the entry below to record the income and the reversal of income.

IRS Notice 2014-7 payments are not taxable and not reportable.  But since you have received a 1099, you want to acknowledge to the IRS that you are in receipt of the form.  You want to record the 1099 income, then immediately reverse the entry in the tax return.  Follow these steps.

• Select Federal from the left side menu.
• Click on Wages & Income.
• Scroll down to Less Common Income.  Click Show more.
• Click Start / Revisit to the right of Miscellaneous income….
• Click Start / Revisit to the right of Other reportable income.
• At the screen Other Taxable Income enter ‘IRS Notice 2014-7 payments’.
• At the screen Other Miscellaneous Income Summary, click Add another miscellaneous item.
• Enter the same description but enter the payment amount as a negative number.

View the entries at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets.

The entries will be reported on the worksheets within your tax return.

@cjmz96

[Raphnessnt]

I am filing amended returns for 2019-2022, but all of the instructions do not match my desktop versions for 2019-2021.  The only version that is correct, is 2022 1040, line 1d as income and then it lists it as a credit on Line 8, other income from Schedule 1, line 10 as a negative amount.

I am having a very difficult time trying to locate this same lines on previous years.  Please explain why the documentation is not the same for every year, since this has been in place since 2014-7.

[Critter-3]

Please explain why the documentation is not the same for every year, since this has been in place since 2014-7.

Because the tax forms have been changed almost every year since 2018 so you need to adjust for this ... since 2018 the income would be reported on line 8 of the Sch 1 however which line of that section has changed.  Prior to 2018 it was on the form 1040 line 21.