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Taxable for the LLC owner

Forum|Forum|4 years ago
April 21, 2022
14 replies
70 views

If single member disregarded entity LLC receives income from Community Care Licensing Division, California department of social services, for the placement of children with developmental disabilities in a long-term residential care facility; Is the income taxable for the LLC? If it is not taxable, does the owner have to pay self-employment tax when the income passes through? Is this considered a difficulty of care payments paid through a Medicaid waiver program?

More information: the owner lives with the children full-time in the home. The owner is paid an administrative fee for managing the home and is also paid as caregiver. The LLC does have employees that also rotate in and out to help care for the children.

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Best answer by TaxGuyBill

@ChristUp wrote:

If it is not taxable, does the owner have to pay self-employment tax when the income passes through?

The link below will be helpful, particularly #14.

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

But as was mentioned above, you FIRST need to find out if it qualifies or not. The Social Workers should know if it is from a "Medicaid Waiver" program that qualifies for "IRS Notice 2014-7".

J

jeffmcpa2010

Level 10

Disregarded means Disregarded.

The return is prepared as if there were no LLC.

Just prepare the return as if it were a normal Sole Proprietorship.

C

ChristUpAuthor

Level 3

Thank you for responding. Am I to report the money on my return as taxable or nontaxable income? Would I need to pay self-employment tax on it or not?

J

jeffmcpa2010

Level 10

I am not well versed in you taxable/non-taxable question, but if it is taxable it will also be taxable for SE tax.

Just-Lisa-Now-

Intuit Community Champion

"Is this considered a difficulty of care payments paid through a Medicaid waiver program? "

Nobody here can answer that for you. The social worker that placed the children should be able to clear that fact up.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

C

ChristUpAuthor

Level 3

Thank you responding. I really appreciate any guidance.

If it is not taxable, does the owner have to pay self-employment tax when the income passes through?

If when a single member LLC receives payment, is it equivalent (for tax purposes) as the owner themselves receiving a direct payment.

Would the nontaxable income received by a single member LLC still be considered nontaxable when the owner draws the money out for personal use?

T

Terry53029

Intuit Community Champion

See Notice 2014-7 https://www.irs.gov/pub/irs-drop/n-14-07.pdf

see @Just-Lisa-Now- response. You have to check, and not rely on opinions from the internet

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