Well Deserved Tax News for Medicaid Waiver Workers

Many Medicaid Waiver Workers are family members.  Often times special needs loved ones receive their necessary care from moms, dads, siblings, and other family members.  Thankfully, these family caregivers can, in some circumstances, receive compensation through Arkansas’s Medicaid Waiver program.  In many cases, the compensation from this program can provide much needed financial support.

While the Arkansas Medicaid Waiver program is an important tool for special needs families, it has some drawbacks.  One challenge with the program is the hourly wage paid to waiver providers.  Usually, the program pays at or near minimum wage.  Not surprisingly, many recipients of the waiver program have a difficult time finding workers willing to accept such low wages.  Therefore, many family members forgo higher paying jobs to assist their loved ones at the lowest wages allowed by law.

Fortunately, we have recently learned about a little known IRS rule that may be a real blessing to these families.   In IRS Notice 2014-7 (https://www.irs.gov/irb/2014-04_IRB#NOT-2014-7) the service states that it will consider Medicaid wavier payments as “difficulty of care payments”.  This means income earned by some family members will not be subject to federal income tax.   Obviously, this can result in significant savings for some families.  If you believe this rule may apply to you, please give us a call or ask your tax professional.  If you have already filed your 2023 federal income tax return, you may want to consider amending your return.  If we can be of assistance, please call us at (501) 566-8087.