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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I have an adult care home in Hawaii. What is considered

Customer Question

I have an adult foster care home in Hawaii. What is considered gross income? I receive one form of payment from medicaid and the other from the family that handles their social security or SSI.
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: nope
Submitted: 6 months ago.
Category: Tax
Customer: replied 6 months ago.
The income from medicaid is considered care and the income from the family is considered room&board. Are both these incomes nontaxable or just the payment from medicaid? I do not include this income on my GET (form G45) correct?
Customer: replied 6 months ago.
Also, is an Adult care home considered a wholesale service?
Expert:  Lane replied 6 months ago.

Hi. Based on what you've said here, just the Medicaid is exempt.


On January 3, 2014, the Internal Revenue Service issued Notice 2014-7, 2014-4 I.R.B. 445. Notice 2014-7 provides guidance on the federal income tax treatment of certain payments to individual care providers for the care of eligible individuals under a state Medicaid Home and Community-Based Services waiver program described in section 1915(c) of the Social Security Act (Medicaid Waiver payments).


These payments are tax exempt.


But payments to you from family members, whether the source of that income is SSI, Social Security, or other, IS gross income and (after you deduct your expernses) the remaining profit, if any would be taxable. They are just paying you for a service. and all gross income is includable unless exempted under a specific exemption.


In terms of the GET exemption, I'll have to do a little more research. This is ALSO an area where all income is taxable unless there is EITHER a federal exemption (such as with 501(c)(3) non-profit charities) or other 501, non-profits. OR under one of the Hawaii exemptions under § 237-23(a)(3) through § 237-23(a)(7).


Bear with me a moment.


(by the way, no this s not a wholesale service. Wholesale is where goods are either purchased or manufactured for re-sellers, retailers, or other distribution channels)

Expert:  Lane replied 6 months ago.

It doesn't look like you're exempt from GET. (Although the policy here is that if federal law exempts it's GET exempt. On the GET exemption form it states the following:


"Organization has received/applied for a federal income tax exemption as an organization described under Internal Revenue Code (check one):  §501(c)(3)  §501(c)(4)  §501(c)(5) Agricultural or horticultural organization  §501(c)(6)  §501(c)(8)  §501(c)(12) Potable water company  Other:______________________ "


And the Medicaid Waiver payments ARE exempt under Federal law.


The Hawaii exemptions under HI code are, ...

(3) Fraternal benefit societies, orders, or associations, operating under the lodge system

(4) Corporations, associations, trusts, or societies organized and operated exclusively for religious, charitable, scientific, or educational purposes

(5) Business leagues, chambers of commerce, boards of trade, civic leagues,etc.

(6) Hospitals, infirmaries, and sanitaria, and

(7) Companies that provide potable water to residential communities that lack any access to public utility water services and are tax exempt under section 501(c)(12) of the Internal Revenue Code