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STATE OF WASHINGTON
DEPARTMENT OF SOCIAL AND HEALTH SERVICES
Aging and Long-Term Support Administration
Home and Community Services Division
PO Box 45600, Olympia, WA 98504-5600
H16-032 - Policy and Procedure
April 6, 2016
|TO: |Home and Community Services (HCS) Division Regional Administrators |
| | |
| |Area Agency on Aging (AAA) Directors |
| | |
| |Developmental Disabilities Administration (DDA) Regional Administrators |
|FROM: |Bea Rector, Director, Home and Community Services Division |
| | |
| |Don Clintsman, Deputy Assistant Secretary, Developmental Disabilities Administration |
|SUBJECT: |IRS Private Letter Ruling (PLR) regarding Notice 2014-7, Difficulty of Care Payments Excludable from Income |
|Purpose: |To notify staff that Washington has received a Private Letter Ruling from the Internal Revenue Service (IRS) |
| |on Difficulty of Care Payments. The Ruling expands the income tax exclusion to providers of clients served |
| |by Medicaid state plan programs. |
|Background: |On January 1, 2014, the IRS issued Notice 2014-7 which allowed providers to exclude most income earned |
| |through the provision of waiver personal care services in specific situations when the provider and client |
| |live in the same household. This income exclusion applied only to those payments for personal care to clients|
| |served through waivers. The exclusion does not apply to payments made for respite care or paid time off. |
| | |
| |On July 1, 2015, at the direction of the Washington State Legislature, the majority of personal care services|
| |were moved to the Community First Choice (CFC) program. The IRS would not definitively say that Washington |
| |could broaden the application of the income exclusion to eligible providers under the CFC program. Because |
| |of the position taken by the IRS, payments made under the CFC program were not excluded from income reported |
| |to the IRS beginning July 1, 2015. |
|WHAT’S NEW, CHANGED, OR |DSHS formally submitted a Private Letter Ruling request to the IRS. The request described the similarities |
|CLARIFIED: |among Washington’s waiver, CFC and State Plan Medicaid Personal Care programs. DSHS asked the IRS to allow |
| |Washington State to apply the tax exclusion to payments made under both the CFC and the State Plan Medicaid |
| |Personal Care (MPC) programs. |
| | |
| |On March 18, 2016, the IRS agreed with Washington’s position and ruled that the tax exclusion should be |
| |extended to providers serving clients under the CFC and MPC programs. The tax exclusion can now be applied |
| |to payments made under these programs in addition to payments made under waiver programs. |
| | |
| |The exclusion applies to all open tax years, including 2015, where criteria for this exclusion are met. |
| | |
| |DSHS will not issue corrected tax documents for tax year 2015 or prior. |
| | |
| |This Information will be provided to all IPs through direct mailing and emails and to Adult Family Homes |
| |through a Dear Provider Letter. |
|ACTION: |Direction to staff and providers about the 2016 tax year will be made available at a later date. When the |
| |process with the payment system vendor is finalized, this MB will be re-issued and will contain instructions |
| |for tax year 2016. |
| | |
| |In the meantime please use the following information to assist with questions about Difficulty of Care |
| |Payments and the IRS Private Letter Ruling. |
| | |
| |If clients or providers have questions about the ruling, they may access information at: |
| |The ALTSA “Becoming a Paid Caregiver” site: |
| |Go to: |
| |Click on: IRS Notice 2014-7, Difficulty of Care Payments Excludable from Income; or |
| |The ATLSA “Information for Adult Family Home Providers” site: |
| |Go to: |
| |Click on: IRS Notice 2014-7, Difficulty of Care Payments Excludable from Income; or |
| |The IPOne FAQ site, in the “Changes” tab: |
| |Got to: |
| |In the question shown below, the word “here” links to the information page |
| |Q: What information is available regarding the IRS Notice 2014-7, Difficulty of Care Payments Excludable |
| |from Income? or |
| |Information on this ruling is available here. |
| |The DDA website: |
| |Go to: where the link to the information page will be available in the “Latest |
| |News” section for about one month |
| |In early May, this link will be moved for permanent placement to: |
| |
| |r-information |
| |The DDA “Residential Provider Resources” site: |
| |Go to: |
| |Click on: IRS Notice 2014-7, Difficulty of Care Payments Excludable from Income |
| |Staff are prohibited from providing tax advice to clients or providers. Instead, the provider or client may:|
| |Contact their tax advisor or the IRS. |
| |Contact the DSHS Tax Desk at: |
| |(360) 664-5830 – Lacey/Olympia |
| |(866) 563-8155 – Toll free |
| |taxinfo@dshs. |
| |Consult the IRS Questions and Answers publication located at: |
| |. |
| |Question #11may be helpful to taxpayers filing or amending 2015 taxes. |
|Related |Difficulty of Care Payments – Washington State Private Letter Ruling |
|REFERENCES: |[pic] |
| | |
| |MB H14-056 |
| |IRS tax reporting rule changes that may affect Individual Providers who live with client receiving personal |
| |care services through qualified 1915(c) waiver programs |
|CONTACT(S): |Stacy Graff, IP Program Manager |
| |(360) 725-2533 |
| |stacy.graff @dshs. |
| | |
| |Jaime Bond, DDA State Plan Services Unit Manager |
| |360-725-3525 |
| |Jaime.Bond@dshs. |
| | |
| |Jennifer Smith, HCS IPOne Program Manager |
| |(360) 725-2551 |
| |Jennifer.Smith@dshs. |
| | |
| | |
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