June 12, 2014
ALTSA: AFH #2014-003
PROVIDER TAX EXEMPTION
Dear Adult Family Home Provider:
Residential Care Services is providing this courtesy notice regarding a recent change in federal tax laws that may benefit Medicaid-contracted adult family home providers. This change exempts some adult family home providers from federal income tax and social security tax on payments received on or after January 3, 2014 if they meet the criteria in IRS Notice 2014-7. Some of the criteria listed follow.
The provider must:
- Live in the home with the residents; and
- Care for 5 residents who receive Medicaid payments through one of the qualifying 1915(c)(3) waiver programs (for example COPES, New Freedom); and
- Own the home as a sole proprietor or as an LLC with only the provider's or the provider and spouse's name in the corporation.
Please note: Medicaid Personal Care (MPC) does not qualify for this tax benefit.
A provider who qualifies for this tax benefit will not receive an IRS Form 1099. If the provider has a sixth resident, the payments received for that resident are not tax exempt.
To learn more about this new ruling please visit the IRS website: https://www.irs.gov/irb/2014-04_IRB
Residential Care Services cannot assist you with tax-related issues. Please contact the DSHS Tax Unit at 360-664-5830 or e-mail Taxinfo@dshs.wa.gov if you have questions regarding this matter.
Sincerely,
Carl I. Walters II, Director
Residential Care Services