Paying taxes

Discussion in 'General Discussion' started by vonbrown, Feb 20, 2017.

  1. vonbrown

    vonbrown Newbie

    Hello, I'm am at my wits end finding a answer. I receive Aid and Attendance Benefits and pay a family member monthly for care. Does my care provider (the family member) need to file a tax return for the money I pay her? I also want to mention it is her only income beside the SSI she receives for her daughter. If so, how do you report it? She has received no paperwork from Social Security, IRS or the VA? I understand my benefit is tax free, but what about the person (my family member) I'm paying to cook, clean, ect, ect.
     
  2. deanyj

    deanyj Newbie

    Hi, Disclaimer: I am not a professional tax person. I am familiar with this scenario though. You can get a 1099 form from the IRS web site to report to the IRS that you have paid a certain amount of money to a person for services. This is submitted once a year for the previous year's taxes. The IRS also has a form to make Federal tax deposits for estimated taxes that may be due on the money that has been paid. These estimated taxes will prevent any penalities that can be incurred if money is owed to the government. I am not sure about the State taxes but you can look at the state government web site. If you call the IRS, they can guide you to the information that you need. The State may also do this. Hope all works out well for you.
     
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  3. lilybet66

    lilybet66 Newbie

    Pretty much in same scenario as yourself. I care for my mom. I claimed all VA income to myself as a small business. I think it's form Schedule C. It was easy to do on Turbo tax. I was able to print off estimated taxes due on a quarterly basis to avoid the big lump some of taxes at one time.
     
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  4. Kaylin

    Kaylin Hero Member Staff Member

    Thank you, deanyj and lilybet66 for giving your opinion!
     
  5. DebbieTownley

    DebbieTownley Newbie

    I used to prepare taxes professionally, and am also a fiduciary for someone's aid and attendance benefits. You should be withholding taxes and filing wage reports with the IRS. The only exceptions are your children under the age of 21, your spouse, your parent, or a child under the age of 18. The wages paid to the relative should be reported on a W2 form. A 1099 form is for earnings from self employment, as if the person performing the service does this same service for others, sets their own hours, rate of pay, and how they accomplish their job, supplies their own tools and equipment, etc. You have a household employee if you pay them more than $2000 per year and control what they they do. You should be deducting 6.2% for social security, 1.45% Medicare, and income taxes from your employee's paycheck. You match the employee portion of social security and Medicare taxes. See IRS publication 926 for more information. The government is pretty particular with what is called "trust fund" deposits. Please don't possibly jeopardize your aid and attendance benefits by not seeking and following professional advice! Here is the link to IRS publication 926

    https://www.irs.gov/pub/irs-pdf/p926.pdf
     
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  6. Lisa

    Lisa Newbie

  7. Kaylin

    Kaylin Hero Member Staff Member

    I'm sorry, Lisa, but I cannot give any tax advice about this situation. I suggest you speak to a tax professional on the matter.
     
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  8. Lisa

    Lisa Newbie

    So for all those who are still slogging thru this subject like I am for the first time. I spent over 3 hours on the phone with the IRS on Saturday trying to get an exact answer on this subject. The IRS agent that eventually provided an answer understood the Aid & Attendance Pension program because he had looked into it for his father. After asking me if I live with my Mother whom I care for (if either she lives with me or I live in her home to care for her) to which I answered in the affirmative, he said that this mirrors and is included as the same as the Medicaid or Medicare Waiver rule (https://www.taxact.com/support/1199/2016/difficulty-of-care-payments-irs-notice-2014-7) and is not counted as taxable income to the paid caretaker. To which I asked, what do I do then? He said nothing, you do not declare this as income but if Mom wished to issue a 1099 for whatever reason you would then apply for the waiver or list the income on line 21 of the 1040, not clear on that part. There is a question and answer page on this on the IRS site here: https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

    He referred me to Pub 525 under Veterans Benefits tax rules and the 1040 instructions on pg 31 as well. I am still doing research but thought I would put this information out there for discussion.
     
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  9. Lisa

    Lisa Newbie

    I will add also that the IRS agent said that for a caregiver not living with the person being cared for (this may depend on the state you live in, I know this is the case in Alaska) it can either be set up as an employee/employer W-2 situation or an independent contractor and a 1099 issued as deanyj stated above.

    Kaylin, I know that the VA works closely with the IRS to verify everything on an ongoing basis instead of having the veteran fill out the old reporting forms each year. I know they would verify the income remains the same from year to year and nothing changes there. Would they also want to see the medical deduction of the amount paid to the caregiver?? Or do they just look for unreported changes in income that doesn't match the original application?
     
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  10. Kaylin

    Kaylin Hero Member Staff Member

    I'm happy to hear you had some success speaking to someone at the IRS! Thank you for coming back and giving your advice on the matter based on what the IRS agent told you. This will be helpful to others. The VA will most likely look at changes in income/assets and changes in medical expenses. Therefore if there are any changes in the ongoing medical/care expenses each month that you feel you should update the VA on then I would suggest you do so. For example, if a veteran is spending $1000/mo. in total care expenses but suddenly has to take on more care from a home care agency and it changes to $1100/mo. then you would update the VA. I hope that helps?
     
  11. Matt375

    Matt375 Newbie

    Any time there is a change in income or medical expenses, either positive or negative, the VA should be notified. As then you will have grounds for a waiver if there is an overpayment issue.
     
  12. Lisa

    Lisa Newbie

    Thank you Matt375.
     
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