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I'm dealing with a very similar situation and this thread has been incredibly helpful! I've been receiving Medicaid waiver payments for caring for my elderly father with dementia who lives with me. Like many of you, I've been reporting these payments as self-employment income on Schedule C and paying SE tax on about $22,000 annually. After reading through all these responses, I'm convinced I need to make the switch to excluding these payments under Notice 2014-7. My biggest concern is making sure I do this correctly - I don't want to trigger any red flags with the IRS by suddenly changing how I report this income after several years of Schedule C filing. Has anyone here worked with a tax professional specifically on this issue? I'm wondering if it's worth paying for professional help to ensure I handle both the current year exclusion and the amended returns properly. Also, for those who filed amended returns, did you do them all at once or space them out over time? Thanks again to everyone who shared their experiences - this is exactly the kind of real-world guidance that's impossible to find elsewhere!
I can definitely understand your concerns about making this change after years of Schedule C reporting! I actually worked with a CPA who specializes in disability-related tax issues when I made this transition, and it was absolutely worth the cost for peace of mind. The professional helped me verify that my specific state waiver program qualified under Notice 2014-7 and prepared all three of my amended returns with proper documentation. She also drafted a detailed explanation letter to attach to my current year return explaining the change in reporting method, which I think helped avoid any IRS questions. As for timing, my CPA recommended filing all the amended returns at the same time to show a consistent pattern of correction rather than piecemeal changes. We filed them in February along with my current year return, and everything processed smoothly. One thing the CPA caught that I wouldn't have thought of - she made sure to verify that the care I provide qualifies as "services" under the notice requirements, not just room and board. Since you're caring for your father with dementia, that should definitely qualify, but having professional confirmation was reassuring. The cost was around $800 for the consultation and preparation of all returns, but I recovered over $4,200 in overpaid SE tax, so it was definitely worthwhile!
I'm in a very similar situation - caring for my disabled adult daughter and receiving Medicaid waiver payments that I've been incorrectly reporting on Schedule C for the past 4 years. Reading through all these responses has been eye-opening! One question I haven't seen addressed: if I switch to excluding these payments under Notice 2014-7, will this affect my ability to contribute to a SEP-IRA? I've been making retirement contributions based on this "self-employment income" for years. If I exclude the Medicaid payments, I'm wondering if I'll lose that retirement savings opportunity or if there are other ways to maintain tax-advantaged retirement savings as a caregiver. Also, for those who successfully amended multiple years - did you notice any impact on state taxes? I'm in California and wondering if the state will automatically adjust based on the federal changes or if I need to file separate state amended returns. Thank you all for sharing your experiences. This community discussion has provided more clarity than hours of searching through IRS publications!
Great question about the SEP-IRA impact! Unfortunately, if you exclude the Medicaid waiver payments under Notice 2014-7, you won't be able to use those payments as the basis for SEP-IRA contributions since they're no longer considered self-employment income. However, if you have any other legitimate self-employment income, you can still contribute based on that. Some caregivers I know have looked into opening a Roth IRA instead (if income limits allow) since those don't require earned income from self-employment specifically. You might also want to explore whether your state has any retirement savings programs for caregivers - some states have been developing these recently. Regarding California state taxes, you'll likely need to file separate state amended returns. California generally doesn't automatically conform to federal changes, especially for something as specific as Notice 2014-7. I'd definitely recommend checking with a California tax professional since state treatment of Medicaid waiver payments can vary significantly from federal rules.
OP - one more thing to consider - if this is your first year with self-employment income, don't forget you might need to make quarterly estimated tax payments this year! That was the thing that surprised me most when I first filed a Schedule C.
Omg I didn't even think about that. Are the quarterly payments mandatory? My business is pretty small - made like $8,500 last year from my Etsy store. How do I even figure out how much to pay each quarter?
Generally, you need to make quarterly payments if you expect to owe $1,000 or more in taxes when you file. With $8,500 in business income, you might be under that threshold, especially if you have taxes withheld from another job. The easy way is to pay 100% of your previous year's tax liability divided by 4 (or 110% if your income is over a certain threshold). You can use Form 1040-ES to calculate this. If you don't make enough estimated payments, you might face an underpayment penalty, though it's usually not huge for smaller amounts.
Just wanted to add - for your first time filing Schedule C, double-check that you've correctly calculated your self-employment tax using Schedule SE. That's separate from your regular income tax and catches a lot of new self-employed filers off guard. The SE tax is basically your Social Security and Medicare taxes since you don't have an employer paying half of it anymore. Also, since you mentioned using TurboTax, make sure you review the "Tax Summary" section before finalizing - it should show you exactly what forms are being filed and any signatures required. The software usually walks you through the signature process pretty clearly for both e-filing and paper filing options. Good luck with your first Schedule C filing! It gets much easier once you've done it a few times and understand the process.
Congrats on finally seeing that 846 code! What a journey you've been on with the amended return and refund freeze. From my experience and what I've seen others post here, paper checks typically arrive 5-7 business days after the 846 date, so since yours shows 01-07-2025, you should hopefully see it by this Friday or early next week. That progression from the 811 "refund freeze removed" on 12-21 to the 846 on 01-07 is exactly what you want to see - shows everything is finally moving through properly. Plus getting interest with that 776 code is a nice bonus after all the waiting! Definitely sign up for USPS Informed Delivery if you haven't already - you'll get photos of your mail each morning so you know when it's coming. Keep us posted when it arrives! š¤
This is super helpful, thank you! Just set up USPS Informed Delivery based on all the recommendations here - sounds like it'll be perfect for tracking when it actually shows up. It's been such a long road with the amended return and all these cryptic codes, but I'm finally feeling optimistic! Really hoping it arrives by early next week like you're saying. The interest payment is definitely a nice silver lining after everything I've been through with this whole process š
Awesome news about your 846 code finally showing up! That's such a relief after everything you've been through with the amended return and freeze. From what I've seen here, paper checks typically take 5-7 business days after the 846 date to arrive. Since yours is dated 01-07-2025, you should hopefully see it by this Friday or early next week. The timeline from your 811 "refund freeze removed" on 12-21 to the 846 on 01-07 looks perfect - everything's finally moving! And that 776 interest code is a nice bonus for all your patience. Definitely recommend setting up USPS Informed Delivery if you haven't already - you'll get daily email previews of your mail so you'll know exactly when that check is coming! š
This is all so encouraging to hear! Just got my USPS Informed Delivery set up too - everyone here is so helpful with the recommendations. After months of stressing over all these codes and waiting for the amended return to process, I'm finally feeling like there's an actual end in sight! Really hoping it shows up by early next week like you mentioned. The interest payment is definitely making all this waiting feel a bit more worthwhile š¤ Will definitely update everyone when it arrives!
A creative solution some companies use is providing experiences rather than physical gifts. Team outings, special lunches, or tickets to events are sometimes classified differently than direct gifts if they serve business purposes like team building or promoting company culture. I personally think the best approach is transparency - if you're going to give something taxable, just be upfront that it might impact their taxes slightly but is still meant as a genuine thank you. Most employees would rather have a taxable gift than no gift at all!
I've seen my workplace do this! They sent our whole team to a baseball game last summer as a "thank you" for finishing a big project. They called it a team-building event but it was clearly a reward. Much better than getting a taxable gift and nobody had to deal with tax implications.
Team experiences are often a win-win approach. When structured properly as occasional team-building or morale events, they can qualify as working condition or de minimis fringe benefits. Employees typically value these experiences highly, and they create shared memories that can strengthen workplace relationships. I find that most employees appreciate when employers are honest about tax implications rather than trying to hide them. If you're going to give something substantial enough to be meaningful (like a $250 gift), it's usually better to gross it up (increase the amount to cover the anticipated taxes) rather than pretending it isn't taxable when it is.
From my experience working in payroll, the $200-250 range your manager is considering will definitely be treated as taxable compensation. The IRS is pretty strict about this - any gift from employer to employee in a work context gets taxed, regardless of the genuine appreciation behind it. One thing to consider is asking your manager to "gross up" the gifts - essentially increase the amount to cover the tax burden so employees receive the intended net value. For example, if she wants each person to effectively receive $200, she might need to give around $270-280 to account for federal, state, and payroll taxes. Another approach is splitting the appreciation into multiple smaller components: maybe a $50 gift card (taxable but smaller impact) plus a nice company-branded item under $75 (potentially de minimis) plus a team celebration lunch (generally non-taxable when occasional). This way the total appreciation is still meaningful but the tax hit is reduced. The key is being transparent with your team about any tax implications upfront so there are no surprises come W-2 time!
This is really helpful advice! The "gross up" approach makes a lot of sense - it shows the manager is willing to take responsibility for the tax consequences rather than passing them onto employees. I hadn't thought about splitting the appreciation into multiple components either. That seems like a smart way to maximize the impact while minimizing the tax burden. Thanks for sharing the payroll perspective - it's exactly the kind of practical insight I was hoping to find!
Malik Thomas
As someone who's helped dozens of F1 students navigate this exact situation, I want to add a few critical points that haven't been fully addressed: **Visa Status Clarification:** The key distinction is that subleasing your personal residence is generally NOT considered "employment" under F1 regulations because it's passive rental income, not active work. However, this can vary by interpretation, which is why checking with your DSO is crucial. **Tax Treaty Benefits:** Many students don't realize that rental income may be treated differently under tax treaties than employment income. For example, students from countries with favorable tax treaties (like India, South Korea, etc.) might find that rental income doesn't qualify for the same treaty benefits as their on-campus job income. **Practical Timeline:** If you're planning to sublease for summer 2025, start the process NOW. Getting landlord approval, DSO consultation, and proper documentation takes time. Don't wait until May to figure this out. **Alternative Solutions:** Consider these options that might be simpler: - Room rental through your university's official housing services - Temporary license agreements instead of formal subleases (some landlords prefer this) - Partnering with international student organizations that help facilitate summer housing arrangements **Red Flags to Avoid:** Don't sublease if your lease explicitly prohibits it, if you can't get proper documentation, or if your DSO advises against it. The $2,700 isn't worth jeopardizing your visa status or facing eviction. The bottom line: it CAN be done legally and safely, but it requires proper preparation and documentation. Take the time to do it right!
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Chloe Davis
ā¢@Malik Thomas This is incredibly comprehensive advice - thank you! I m'particularly interested in your point about tax treaty benefits potentially not applying to rental income the same way they do for employment income. That s'something I hadn t'considered at all. I m'from Canada, and I know there s'a US-Canada tax treaty that helps with my on-campus job income. Do you happen to know if Canadian students typically lose those benefits for rental income, or does it vary case by case? I m'trying to estimate my actual tax liability before deciding whether the $2,700 is worth the complexity. Your timeline advice is spot on - I was definitely thinking of waiting until closer to summer to figure this out, but you re'right that getting all the approvals and documentation sorted takes time. The alternative about temporary license agreements is interesting - I hadn t'heard of that approach before. Is that something that needs to be structured differently from a legal/tax perspective, or is it mainly just a different way to present the arrangement to landlords who might be more hesitant about formal subleases? Thanks for emphasizing the do "it right approach" - reading everyone s'experiences here has definitely convinced me that cutting corners isn t'worth the risk!
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Tony Brooks
This is such a helpful thread! I'm also an F1 student considering subleasing for the summer and had no idea about the complexity involved. Reading through everyone's experiences has been incredibly eye-opening. One question that I haven't seen addressed yet - what happens if you're planning to sublease but then your summer plans change? For example, if I get landlord approval and DSO clearance, but then decide to stay in the US for summer research instead of going home, can I easily cancel the sublease arrangement without penalties? I'm also wondering about the timing of tax reporting. If I sublease from June-August 2025, would I report that income on my 2025 tax return (filed in 2026), or does the timing work differently for rental income compared to regular employment income? The visa implications seem to be the most concerning aspect. Even though several people mentioned that rental income is generally considered "passive" rather than employment, the fact that USCIS can be unpredictable about interpretations makes me nervous. Has anyone here actually had their visa status questioned because of subleasing, or is this more of a theoretical concern? Thanks to everyone who's shared their real experiences - this is exactly the kind of practical advice that's impossible to find in official guidance documents!
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Zainab Omar
ā¢Great questions @Tony Brooks! Regarding canceling sublease arrangements if your plans change, this really depends on the specific terms you set up in your sublease agreement and any deposits involved. Most short-term summer subleases include cancellation clauses, but you'd want to negotiate reasonable notice periods (like 30-60 days) to protect both parties. For tax timing, you're correct that rental income from June-August 2025 would be reported on your 2025 tax return filed in 2026. Rental income is reported on a calendar year basis just like employment income, so the timing works the same way. Regarding the visa status concerns, I think this is more theoretical than practical for most students. In my experience helping F1 students, I've never seen anyone actually have their visa questioned specifically for subleasing their personal residence. The key is the distinction between "passive" rental income and "active" business activity. However, it's still worth getting DSO approval to have documentation if questions ever arise. The bigger practical risks tend to be lease violations and unexpected expenses (like the damage deposits others mentioned). Those are immediate issues, while visa concerns are more about long-term compliance and having proper documentation. My suggestion would be to start with the DSO consultation first - they can give you school-specific guidance and help you understand if there are any red flags in your particular situation.
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