Arc and Important Development for Home-Based Families
This is very exciting information for families in the Home-Based Program excluding federal
income taxes if services are provided in the home of the care provider. Understand you
need to talk to your attorney and/or tax consultant about this new IRS Ruling effects your
financial situation. We have talked to ACCES$ today and they are meeting with the IRS on
Thursday for further clarification on this as is The Arc.
One thing we do know is that this is very good news!
I appreciate Brian Rubiin supplying us with this information to share with you.
Observations by Brian Rubin, a former IRS Agent and Former IRS Attorney (prior
to my life taking a fork in the road with the birth of Mitchell Jay Rubin, 33 years
The notice is stating that the IRS is reversing its long standing position on these
payments by “stretching” (for lack of a better term) the language in IRS Code Section
131 which relates to “foster care” payments to Medicaid waiver payments. The notice
concludes that if the services are provided in the home of the care provider, it doesn’t
matter if the care provider is related or not related to the individual. The notice also
stretches to reach the conclusion that the notice would apply to what is commonly
referred to as the “agency model” where, as an example, the parent is the care provider.
Be aware that just because the IRS excludes the payments from “federal” Income Tax
does not preclude the State from electing to include them, tax them for State Income Tax.
Since the Illinois tax return starts with the Federal Adjusted Gross Income (AGI), it would
have to be “added back”, as other federal not taxable income, but state taxable income,
are already done. I believe this would require Illinois legislation.
If the payments are subject to FICA (Social Security Tax) and/or FUTA (Federal
Unemployment Tax) was specifically not addressed in the notice. The notice states: “
This notice does not address whether qualified Medicaid payments excluded from
income under this notice may be subject to tax under the Federal Insurance
Contributions Act (FICA) or the Federal Unemployment Tax Act (FUTA) in certain
the notice obviously does not address State Income Tax or State Unemployment Tax.
While the notice is “effective” for payments received after January 3, 2014, the notice
specifically provides that “taxpayers may apply this notice in taxable years for which the
period of limitation on claims for credit or refund under IRS Section 6511 has not expires.”
That is generally three years.
Rubin Law, a professional corporation Special Needs Legal & Future Planning
President, The Arc of Illinois
Member of the Board of Directors of Pact, Inc. and Clearbrook
Commissioner, State of Illinois Guardianship and Advocacy Commission
Chairman, State of Illinois Autism Task Force
Member of the Board of Directors of the Special Needs Alliance
firstname.lastname@example.org www.rubinlaw.com 847.279.7999 toll free 866.to.rubin (867.8246)
1110 West Lake Cook Road, Buffalo Grove, Illinois 60089-1997
Tony Paulauski Executive Director
The Arc of Illinois
20901 S. LaGrange Rd. Suite 209
Frankfort, IL 60423