In response to state agencies, certified Medicaid provider entities, and individual care providers who have asked whether Medicaid waiver payments for care of eligible individuals, who are related or unrelated to individual care provider, in individual care provider's home may be treated as difficulty of care payments excludable under Code Sec. 131. The IRS announced that it is discontinuing its historical opposition to this exclusion and will now treat Medicaid waiver payments as excludable regardless of whether care provider is related or unrelated to eligible individual. Qualified Medicaid waiver payments compensate care provider for providing additional care required because of eligible individual's physical, mental, or emotional handicap for which state has determined that there is need for additional compensation.
CAUTION: Prior year returns can be amended to exclude these payments and 2010 expires on the 15th.