If You are Receiving Medicaid Waiver Payments, You Should Read This

Article Highlights:

  • What are Medicaid Waiver Payments? 
  • IRS Ruled Them to be Non-Taxable 
  • Taxpayer-Favorable Tax Court Case 
  • Tax Credits 
  • Amended Returns 
Medicaid waiver payments are a type of payment from a state to an individual to take care of another individual who would otherwise be institutionalized, saving the government the cost of the more expensive institutional care.

Back in 2014, the IRS ruled that Medicaid waiver wages would be mandatorily excludable from gross income (not taxed) if the caregiver provided care in the caregiver’s home. This exclusion from taxable income applied regardless of whether the caregiver and the care recipient were related.

Prior to this ruling, payments were taxable and treated as W-2 wages. As such, they were categorized as earned income, which qualified many lower-income individuals for the earned income tax credit (EITC) and, in some cases, for the additional child tax credit (ACTC).

However, this change was a double-edged sword, providing tax-free income for some taxpayers but eliminating others’ ability to qualify for the EITC and ACTC, since the IRS had specified that the payments had to be excluded from gross income, thus eliminating the earned income needed to qualify for the credits.

One couple, the Feighs, disagreed with the IRS’s position. The Feighs received Medicaid waiver payments as wages for caring for their disabled adult children in their own home. When the Feighs filed their tax return, they excluded the income but still treated it as earned income for the EITC and the refundable child tax credit. The IRS took umbrage to that position and the case ended up in Tax Court.

The Tax Court held that the IRS could not reclassify the taxpayer’s Medicaid waiver payment so that it no longer qualified as “earned income” for the purpose of determining tax credits. The Court reasoned that IRS cannot remove a statutory benefit provided by Congress. On March 30, 2020, the IRS acquiesced to the court’s decision, meaning that returns from prior years for which the statute of limitations has not expired can be amended to claim the EITC and ACTC even though the Medicare waiver payments are being excluded from income.

It is important to contact this office immediately if you received Medicaid waiver payments in 2016, since the statute of limitations for claiming a 2016 refund expires on July 15, 2020 for most individuals. Not everyone will qualify for EITC and ACTC, so please contact this office to see if you qualify and if amending your 2016 return would be to your benefit.

Share this article...

Want tax & accounting tips and insights?

Sign up for our newsletter.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .
I consent to receive SMS messages

Title: Accounting / Tax Manager 

We are seeking an Accounting/Tax Manager to join our team! You will lead and manage multiple operations of the tax practice area and deliver quality tax services that will increase the firm’s reputation. You will oversee the work of accountants, review financial statements, and prepare reports. Schedule: Monday to Friday. 

Job Type: Full-time. 

Interested parties please call 214-646-0300.  

Duties and Responsibilities: 

  • Manage and Prepare tax returns for over 2,000 individuals, businesses, non-profits and estates 

  • Contact clients to obtain tax documents 

  • Review tax returns with clients 

  • Provide basic tax planning/solutions services to clients 

  • Accounting/Bookkeeping for firm clients in various accounting software (QBO, QBD, Intacct, Xero, Wave, Zoho Books, BQE Core, etc...) 

  • Other administrative tasks when necessary: 

  • Plan and schedule appointments and events 

  • Greet and assist onsite guests 

  • Answer inbound telephone calls 

  • Draft correspondences and other formal documents 

  • Develop and implement organized filing systems 

  • Manage requests from website and social media management company 


  • Tax preparation experience is required 

  • Experience with Lacerte / Drake Tax software is required 

  • QuickBooks experience is required 

  • Previous experience in office administration or other related fields 

  • Ability to prioritize and multitask 

  • Excellent written and verbal communication skills 

  • Strong attention to detail 

  • Strong organizational skills 

  • Must be able to speak Hindi and English 

Education: Bachelor's (Required), CPA (required), Enrolled Agent: Preferred. 

Experience level: 3 years. 


Salary: $75,000.00 - $110,000.00 per year 


  • 401(k) 

  • 401(k) matching 

  • Dental insurance 

  • Disability insurance 

  • Health insurance 

  • Life insurance 

  • Paid time off 

  • Vision insurance 

  • Work from home 


Interested parties please call 214-646-0300.