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Filing a tax return as a Home Provider

January 16, 2023

Taxes can be a complicated and messy task that can cause you unneeded stress. As a Home provider, the level of complexity of your financial situation increases when it comes to taxes. The Internal Revenue Service has updated the 1040 tax form to show Medicaid waiver payments. If you are under the guidelines of being a home provider receiving tax-free income under Section 131 for the difficulty of care payments, your situation has not changed and this income is still not taxable given that you are under the guidelines set by the IRS. If you have no other income besides the Medicaid waiver payments you receive from your agency, you are not necessarily required to file a tax return given that your taxable income is not over the standard deduction. But you may want to file to receive other benefits such as contributing to retirement accounts, receiving healthcare benefits under the Affordable Care Act, applying for a loan or mortgage, etc. 

Benefits 

The recent changes can help home providers in a variety of ways but one way that may ease you and your agency's problems is that since some home providers have not been required to file a return in the past, it makes getting approved for loans and mortgages that much more difficult. Filing a return will cease the need of requesting a document from your agency explaining how you get compensated and their letterhead being required to put on the form for the loan. 

Contributing to retirement accounts such as individual retirement accounts for home providers. Under the Secure Act of 2019 home providers receiving compensation for the difficulty of care payments can now make non-deductible contributions to an IRA. When making this type of contribution the IRS wants to see that on your return and you will need to file form 8606 on your tax return.

Receiving healthcare benefits under the Affordable Care Act will require you to file a return when you receive a 1095-A.


Costs

The cost of doing this will be a tax preparer fee, tax professionals can charge a variety of different prices depending on how difficult the return is. The costs of not filing a return would include more hassle to get loans, mortgages, and eligibility to contribute to certain retirement accounts.  

The cost of making a mistake can be high when dealing with taxes. Making a mistake on a tax form may raise the risk of an audit by the IRS, that is why we encourage you to seek guidance from a tax professional.  

If you receive a 1095-A and do not file a tax return you will receive a letter from the IRS asking for a tax return. 

Please consult with a tax professional, this is not tax advice.