Community Integrated Programs

  1. What is a community integrated program?
  2. What does it mean to be self-directed?
  3. What are the federal tax consequences of amounts received by a person who is hired by the participant to provide care and supportive services?
  4. Does the federal tax treatment of the Medicaid waiver payments apply for Wisconsin?
  5. I previously reported Medicaid waiver payments or CIP payments as taxable income on my Wisconsin income tax return. May I file amended returns to exclude such income?
  6. Do I have to adjust any credits if I file an amended return to remove Medicaid waiver payments or CIP payments from income?

  1. What is a community integrated program?

    A community integrated program (CIP) is a self-directed support program to provide home or community-based care for certain older people and adults with disabilities. Sometimes called an IRIS (Include, Respect, I Self-Direct), the program is administered by the Wisconsin Department of Health Services.

  2. What does it mean to be self-directed?

    "Self-directed" means that the participant in the program has increased control over the long-term care, goods, and services purchased and how they are provided. The participant can hire, supervise, and dismiss his/her own workers or purchase services through an agency.

  3. What are the federal tax consequences of amounts received by a person who is hired by the participant to provide care and supportive services?

    The federal Internal Revenue Service issued Notice 2014-7, which provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program are difficulty of care payments that are excluded from income under section 131 of the Internal Revenue Code (IRC). CIP is a Medicaid waiver program within the meaning of Notice 2014-7.

    Difficulty of care payments are compensation for providing the additional care of a qualified foster individual which is:

    • Required by reason of a physical, mental, or emotional handicap of such individual with respect to which the State has determined that there is a need for additional compensation, and
    • Provided in the home of the foster care provider.

    The payments must be designated by the payor as compensation for providing the additional care.

    This treatment applies whether the care provider is related or unrelated to the eligible individual.

    Under Notice 2014-7, the "placement" requirement of section 131 of the IRC will be considered met for otherwise qualified Medicaid waiver payments and CIP payments. The other eligibility requirements of section 131 of the IRC must still be met for exclusion of the payments from income. For instance, payments are not excludable to the extent they are made for more than (1) 10 qualified foster individuals who have not attained age 19, and (2) 5 qualified foster individuals who have attained age 19.

  4. Does the federal tax treatment of the Medicaid waiver payments apply for Wisconsin?

    Yes. Any CIP or Medicaid waiver program payments treated as difficulty of care payments that are excluded from federal income are also excluded from Wisconsin income.

  5. I previously reported Medicaid waiver payments or CIP payments as taxable income on my Wisconsin income tax return. May I file amended returns to exclude such income?

    Yes. Amended returns may be filed within 4 years of the original due date of the return. For example, returns for calendar year 2010 were due April 15, 2011. A 2010 amended return may be filed on or before April 15, 2015.

  6. Do I have to adjust any credits if I file an amended return to remove Medicaid waiver payments or CIP payments from income?

    Yes. There are several credits that must be adjusted when you amend your Wisconsin income tax return to remove Medicaid waiver payments or CIP payments from income. These payments were previously reported as wages. The affected credits include:

    • Wisconsin itemized deduction credit – Any decrease in income may increase your standard deduction which in turn will affect your itemized deduction credit.
    • Married couple credit – The decrease in the amount reported as wage income may decrease your married couple credit.
    • Homestead credit or farmland preservation credit from Schedule FC – A taxpayer who is amending to remove the Medicaid waiver payments or CIP payments from income should also amend homestead credit or farmland preservation credit if previously claimed. The amount of these payments is not included in household income for homestead or farmland preservation credit purposes.
    • Earned income credit – If you previously claimed the federal earned income credit, you must now refigure your federal credit to remove the Medicaid waiver payments or CIP payments from earned income. This may increase or decrease your federal earned income credit. The Wisconsin earned income credit should be adjusted based on the revised federal earned income credit.

FOR MORE INFORMATION PLEASE CONTACT:

WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2486
Email: DORIncome@revenue.wi.gov

December 30, 2014