Difficulty of care day program

[Avs19]

Hi,

One of my clients whom I've been helping out for years has always had non taxable difficutly of care income. He never received a 1099

This year, he received a 1099 for a portion of his payments. He told me that it's for transporting the client to and from appointments and performing day services with the client outside of his home.

Notice 2014-7 mentions that reimbursement for transportation is not taxable but I'm unclear on the amount they're giving him to perform serives with the client outside of the home. My client told me that it's for activities such as going to the park and other rehabilitation facilities.

Thanks

[qbteachmt]

There is no such thing as "difficulty of care" tied to day care. It's got a residential requirement. Read about it here:

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

This seems to be plain old independent services.

[Avs19]

I've read this a couple of times in the past. If you look at paragraph two, you'll notice that the IRS labels Medicaid waiver payments as difficulty of care payments excludable from gross income.

My client qualifies for this because his two clients are full time residents at his home.

The question is with the supplemental payments for taking his clients to the museum, parks, and other activities. These payments were reported on a 1099 separately from his other payments.

Thanks

[TaxGuyBill]

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@Avs19 wrote:

The question is with the supplemental payments for taking his clients to the museum, parks, and other activities. These payments were reported on a 1099 separately from his other payments.

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My first thought is that those payments may NOT be part of the Medicaid Waiver program.  Those payments could be coming from some other government-funded program.

I have a client that receives payments, and she also receives a letter from the State stating how much qualifies under 2014-7 (from the Medicaid Waiver program) and how much is taxable (from other state programs).

[Avs19]

Interesting, I have a call in to the agency that gave him the 1099. I'm assuming it's taxable due to it being separate from the payments to house the clients.

[qbteachmt · Accepted solution]

"My client qualifies for this because his two clients are full time residents at his home."

Yes, this part qualifies as difficulty of care. It's "their" home.

"The question is with the supplemental payments for taking his clients to the museum, parks, and other activities. These payments were reported on a 1099 separately from his other payments."

Because that agency did it properly. It's not Difficulty of Care, if it isn't part of the care recipient's plan of care and it's not personal care. It's more like Attendant care, and as you pointed out, it's part of day care. It's socializing and worthy, but not qualified.

Did you read the link I provided, Q11? We've seen that same sort of issue here, where an agency sends the attendant a full W2, the attendant is an employee, but some of their wages qualify as plan of care-related difficulty of care and some is employment wages. It would be broken out.

It seems your taxpayer got everything already divided into qualified and not qualified reporting.

"Those payments could be coming from some other government-funded program."

Exactly. Example: the client might have a Veteran's benefit income of some sort that is incorporated into their care plan. The State would give them a budget in their care plan to hire help directly, and that would cover extra-curricular activities (nonmedical and beyond basic personal care). If that is managed through a State program, it is reported like this topic.

[Avs19]

That makes sense. Pretty sure it's taxable.

Thanks for the help!