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I'd like to assist. What is your theory why these payments are tax exempt?
Hi. Another expert here. My name is ***** ***** I will be happy to help you.
You received the notice because your received 1099Misc and didn't include it on your tax return. Here's what you need to do. Get a copy of Schedule C for that year, claim the entire amount as an income and in part V deduct the entire amount as other expense with a note: “Notice 2014-7"
See here question/answer #14: https://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income
Attach the schedule C to the notice, check the appropriate boxes on the notice that you do not agree with the changes and make sure you do NOT sign it. Mail it back to the address provided on the notice.
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