1. What is a Medicaid home and community-based services waiver program?

  2. What does it mean to be self-directed?

  3. What are the federal tax consequences of amounts received by a person who is hired by the participant to provide care and supportive services?

  4. Does the federal tax treatment of the Medicaid waiver payments apply for Wisconsin?

  5. I previously reported Medicaid waiver payments as taxable income on my Wisconsin income tax return. May I file amended returns to exclude such income?

  6. Do I have to adjust any credits if I file an amended return to remove Medicaid waiver payments from income?


  1. What is a Medicaid home and community-based services waiver program?

    Home and community-based services waivers provide opportunities for Medicaid beneficiaries to receive services in their own home or community rather than in institutions or other isolated settings. The following are Medicaid waiver programs administered by the Wisconsin Department of Health Services:

  2. What does it mean to be self-directed?

    "Self-directed" means that the participant in the program has increased control over the long-term care, goods, and services purchased and how they are provided. The participant can hire, supervise, and dismiss his/her own workers or purchase services through an agency.

  3. What are the federal tax consequences of amounts received by a person who is hired by the participant to provide care and supportive services?

    The federal Internal Revenue Service issued Notice 2014-7, which provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program are difficulty of care payments that are excluded from income under section 131 of the Internal Revenue Code (IRC).

    Difficulty of care payments are compensation for providing the additional care of a qualified foster individual which is:

    The payments must be designated by the payor as compensation for providing the additional care.

    This treatment applies whether the care provider is related or unrelated to the eligible individual.

    Under Notice 2014-7, the "placement" requirement of section 131 of the IRC will be considered met for otherwise qualified Medicaid waiver payments. The other eligibility requirements of section 131 of the IRC must still be met for exclusion of the payments from income. For instance, payments are not excludable to the extent they are made for more than:

  4. Does the federal tax treatment of the Medicaid waiver payments apply for Wisconsin?

    Yes. Any Medicaid waiver program payments treated as difficulty of care payments that are excluded from federal income are also excluded from Wisconsin income.

  5. I previously reported Medicaid waiver payments as taxable income on my Wisconsin income tax return. May I file amended returns to exclude such income?

    Yes. Amended returns may be filed within 4 years of the original due date of the return. For example, returns for calendar year 2014 were due April 15, 2015. A 2014 amended return may be filed on or before April 15, 2019.

  6. Do I have to adjust any credits if I file an amended return to remove Medicaid waiver payments from income?

    Yes. There are several credits that must be adjusted when you amend your Wisconsin income tax return to remove Medicaid waiver payments from income. These payments were previously reported as wages. The affected credits include:

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2486
Email: DORIncome@wisconsin.gov

January 2, 2019