IA Medicaid Waiver Payments -- 2014-7 question

KKM0401
KKM0401 Member Posts: 1 Newcomer
in Filing my taxes

Hi,

I'm a live-in caregiver for my son through our Medicaid waiver system. I know that I'm eligible for the exclusion as I've claimed it every year since 2017-18 or so.

However, this year due to a change in the program that occurred at the end of the year, I will receive both a 1099-MISC, which I've always gotten AND a W-2 for one paycheck I received in December.

In preparation for this filing season, I've begun to prepare our return for the first time using FreeTaxUSA. I put my W-2 income on line 1a and I also filled out a Schedule C for the 1099-MISC income like I've always done and wrote "Excludable Notice 2014-7" on Part V of Schedule C. I eventually got to the "other income" page and chose Yes under the "Medicaid Waiver Payments to Care Provider" question, which allowed me to fill out the amount in box 1 of my W-2 and entered the Schedule C amount for what wasn't included in box 1. I chose YES for EITC purposes, as well obviously. That made an entry on Schedule 1, line 8s that combined both sources and effectively zeroed out the MWP income.

I have never claimed the EITC as I just found out late in 2025 that I could despite the nontaxable income.

I know the FAQ says that it won't increase my taxable income, but as it stands now, I have zero taxable income as the only other income we have is my husbands Social Security, so for the past several years I have a $0.00 reported to SSA.

I guess what I want to know is if the income I received from the waiver work will be reported as taxable to Social Security because of the EITC or if it will still report as $0.00 as that's technically our AGI?

The difference in refund amounts is quite a lot so I don't want to do the wrong thing.

Sorry this is so detailed, but I appreciate any guidance.

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Answers

  • JohnV
    JohnV FreeTaxUSA Agent Posts: 27 image
    edited January 26

    From your detail explanation below, the main question you have is "if the income I received from the waiver work will be reported as taxable to Social Security because of the EITC or if it will still report as $0.00 as that's technically our AGI?"

    During the year you received both a 1099-MISC and a Form W-2. Whether the income are subject to social security and Medicare taxes depends on whether you are an employee of the agency, an employee of the individual care recipient, or an independent contractor.

    If you are an employee of an agency, then the income is subject to social security and Medicare taxes. If you are an employee of the individual care recipient, then the income is subject to social security and Medicare taxes, but there is an exception for parent caring for their children, which you met and so the payment is not subject to social security and Medicare taxes in your case. Lastly, if you are an independent contractor, which you mostly are due to you receiving the Form 1099-MISC, the the payments are not subject to social security and Medicare taxes.

    You can review the IRS guidance here

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