IRS Notice 2014-7 (Difficulty of Care Payments)

Supporting Elevatedcareaz Means Supporting Your Community

The Arizona Health Care Cost Containment System (AHCCCS) is the State Agency that administers Arizona’s Medicaid Program. Arizona has operated its Medicaid program, including how it provides Home and Community Based Services (HCBS), through a Medicaid waiver since 1982. The Arizona Department of Economic Security (ADES) / Division of Developmental Disabilities is the state department that handles the Medicaid waiver program and is the sole program contractor for the developmentally disabled population in the state of Arizona.

Elevated Care AZ (ECAZ)is certified by the ADES to provide HCBS to individuals with developmental disabilities. ECAZ is also under contract with the ADES to provide HCBS services to individuals with developmental disabilities and is a current active AHCCCS provider. ECAZ makes payments to individual care providers for non-medical support services. As a result of this, if you are someone that lives with your care recipient on a full-time basis, there is a very high likelihood that IRS Notice 2014-7 will apply to you.

IRS Notice 2014-7 states that payments provided under a Medicaid Home and Community Based Waiver program are difficulty of care payments and are excludable from income if the care provider is living with the care recipient on a full-time basis. This means that the wages ECAZ pays to you may be excludable from your income, resulting in less federal and state income tax.

IRS Notice 2014-7 can be found at Internal Revenue Bulletin: 2014-4 | Internal Revenue Service (irs.gov). Frequently asked questions (FAQs) regarding IRS Notice 2014-7 can be found at Certain Medicaid Waiver Payments May Be Excludable From Income | Internal Revenue Service (irs.gov). We routinely refer employees to Q10, Q11 and Q12.

Prior to taking advantage of this benefit, we highly encourage and suggest that you consult with a tax professional to determine if IRS Notice 2014-7 applies to you.