How to Amend Taxes for Medicaid Home Care (IRS notice 2014-7)

“You can amend three years back. I got back $20,000 by doing that!” – Rosemary

This page is for people who work as home aides in Medicaid and Medi-cal homecare programs. These programs are called different things in different states, and may be called IHSS, or Medicaid Waivers, or Home and Community Based Care or something different in your state.

TAX EXCLUSIONS

If you work as an aide for a person with disabilities, and you live with your client, your income is exempt from taxes. Learn more here:

PAST TAXES

If you didn’t take the exclusion, it might not be too late!

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

Q10.

If I received payments described in Notice 2014-7 in an earlier year, may I file an amended return to exclude the payments from gross income that I reported as income in the earlier year?

A10.

Yes. You may file a Form 1040-X, Amended U.S. Individual Income Tax Return, if you received payments described in the notice in an earlier year and the time for claiming a credit or refund has not expired under § 6511 of the Internal Revenue Code. A taxpayer generally may file a claim for refund within three years from the date the return was filed or two years from the date the tax was paid, whichever is later.

For more information, see “When To File” in the instructions to Form 1040-X or Tax Topic 308, Amended Returns, available at /taxtopics/tc308.html. In Part III of Form 1040-X, you should explain that the payments are excludable under Notice 2014-7.

Excluding payments described in the notice in an earlier year may affect deductions or credits that you claimed for the earlier year, as well as other tax items for the earlier year. To help expedite the processing of your amended return, you should include the following to substantiate your claim:

(1) the full name of the individual receiving care (and the care recipient’s social security number or other taxpayer identifying number, if available);

(2) copies of documents from third parties to show that you and the individual receiving care resided in the same home in the year to which the claim relates (such as a driver’s license or other government-issued document, social agency document, bank statement, medical bill, or utility bill); and

(3) evidence that the individual is receiving care under a state Medicaid waiver program.

FILLING OUT TAX FORMS

From intuit, this article explains How to Report Excluded Income on your tax forms.

CHILD TAX CREDIT AND EARNED INCOME TAX CREDIT

If you do not pay taxes on this income, can you still get an earned income credit? And child tax credit? There is not yet a published IRS regulation on this topic. However, in this court ruling, it was found that tax credits can be claimed.  Please consult with your accountant on next steps.

Thanks for Reading

🌸 Learn more about: Ten Secrets for People in Medicaid and Medi-cal Home Care Programs

🌸 This page is part of the free online guide: The Self-Advocacy Guide to State Home Aides

🌸 Art on this page by Robin Mead and Elizabeth D’Angelo.

🌸 Page Updated: 1/10/20

🌸 To get daily updates on helpful disability services, and low income programs, follow us on Facebook: The Sleepy Girl Guide.

🌸 Please comment below with stories, ideas, questions or suggestions. Please let us know if any links on this page stop working. Please share this page with others by pressing one of these magic little buttons:

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