Does Medicaid waiver caregiver income count for Social Security benefits when we have difficulty of care exemption?

This is a complex situation because the 'difficulty of care' exemption primarily affects income tax, not necessarily Social Security. Even though this income isn't reported on a W-2 or 1099, the IRS Notice 2014-7 that created this exemption doesn't automatically exclude it from FICA taxes (Social Security and Medicare). You should be paying self-employment taxes on this income, which would mean it DOES count toward your Social Security earnings record and future benefits. Have you been filing Schedule SE with your tax returns?

we have the SAME situation with our son!!! we found out last year we shouldve been paying self employment tax the whole time (6 yrs) even though the income is exempt from income tax. our accountant never caught it either! now we're trying to figure out if we can go back and amend returns to get SS credit but it looks like you can only go back 3 years. so frustrating!!!!!

I work for a disability advocacy organization, and this question comes up frequently. The difficulty of care exemption under Notice 2014-7 excludes this income from federal income tax, but it doesn't exempt you from self-employment taxes (Social Security and Medicare). Here's what you need to know: 1. This income DOES count for Social Security purposes IF you pay self-employment tax on it 2. You should be filing Schedule SE with your tax returns to pay these taxes 3. The income will then be credited to your Social Security earnings record 4. For it to count toward your Social Security benefits, you must have paid the self-employment tax If you haven't been paying self-employment taxes, you can amend returns for the past three tax years. Unfortunately, anything beyond that is typically lost unless there are exceptional circumstances.

I had a somewhat similar situation (not identical but related to exempt income). When I called SSA to ask questions about it, I spent THREE DAYS trying to reach someone who could answer my question. Kept getting disconnected after waiting for hours. So frustrating!!!!

did u ask ur daughters caseworker? thats who helped us understand this whole mess. most tax people dont even know about the difficulty of care exemption let alone how it works with SS. i think its cause its kinda rare.

This is one of those situations where the IRS and SSA don't communicate well with each other or with taxpayers. I experienced something similar with exempt parsonage income as a minister - different exemption but same confusion about Social Security credits. The key thing to understand is that ANY income you want to count toward Social Security must have FICA or self-employment tax paid on it, regardless of whether it's exempt from income tax. If you haven't been paying these taxes, unfortunately those earnings won't appear on your Social Security earnings record. I strongly recommend getting an accountant who specializes in special needs family situations. General tax preparers often miss these nuances. You can also request an earnings record from SSA to see what's actually been recorded for these years.

has anyone actually CALLED the social security office about this?? wat did they say?

After doing more research on your situation, I want to add that there is a process for requesting an earnings record correction with Social Security, but it requires evidence that you actually paid the self-employment taxes for those years. The difficulty of care exemption creates a unique situation that many tax preparers misunderstand. Moving forward, make sure your tax preparer includes Schedule SE with your tax returns to pay self-employment tax on this income. For past years, you can: 1. Amend returns for the past three tax years by filing Form 1040X along with Schedule SE 2. For years beyond the amendment window, you may still be able to file a request with SSA using Form SSA-7008 (Request for Correction of Earnings Record), but success will depend on your specific circumstances This is definitely a situation where speaking directly with someone at SSA who specializes in earnings record issues would be beneficial.

I'm new to this community but going through a very similar situation with my adult son who has autism. We've been caregivers under a state waiver program for 5 years and just discovered we may have been missing out on Social Security credits this whole time. Reading through everyone's responses has been incredibly helpful - it sounds like the key issue is whether self-employment taxes were paid, not just the income tax exemption. I'm definitely going to request my Social Security earnings statement to see what's actually been recorded and find a tax professional who understands these special situations. Thank you all for sharing your experiences - it's reassuring to know we're not the only family dealing with this confusion!

I'm dealing with this exact same issue! My spouse and I have been caregivers for our adult daughter through a state waiver program for about 4 years now. We've had the difficulty of care exemption the whole time, and our tax preparer never mentioned anything about self-employment taxes. After reading through all these responses, I'm realizing we probably haven't been building Social Security credits either. This is such a frustrating situation because the exemption notice doesn't clearly explain the difference between income tax exemption and payroll tax obligations. I'm going to call our tax preparer tomorrow to review our past returns and see if we need to amend anything. For those who successfully amended their returns - how long did the process take, and did you face any issues with the IRS or SSA when you made the corrections? I'm worried about triggering an audit or having complications when we eventually apply for Social Security benefits. Thank you everyone for sharing your experiences - it's both comforting and concerning to know this confusion is so widespread among caregiver families!

I'm a newcomer here but have been following this discussion closely as my family is in a very similar situation. We've been providing care for my elderly mother through a Medicaid waiver program for about 3 years, and after reading all these responses, I'm now worried we've made the same mistake with self-employment taxes. What really strikes me is how many families are discovering this issue - it seems like there's a fundamental communication problem between the agencies that created these exemptions and the people who are supposed to implement them (tax preparers, caseworkers, etc.). I have a question for those who have been through the amendment process: When you filed the amended returns with Schedule SE, did you also need to provide any special documentation to prove the caregiver relationship and the difficulty of care exemption? I'm concerned about having all the right paperwork when we start this process. Also, has anyone had success getting their state waiver program to provide clearer guidance on this tax issue? It seems like they should be informing families about these requirements upfront rather than leaving everyone to figure it out years later. Thank you all for sharing your experiences - this thread has been incredibly valuable for understanding what we need to do moving forward!

I'm new to this community and just discovered this thread while researching the exact same issue! My husband and I have been caregivers for our adult son with intellectual disabilities through our state's waiver program for about 6 years. We've always had the difficulty of care exemption, but after reading everyone's experiences here, I'm now panicking that we haven't been paying self-employment taxes either. This thread has been a wake-up call - I had no idea that the income tax exemption didn't automatically mean we were exempt from Social Security taxes too. Our tax preparer never mentioned Schedule SE, and honestly, I don't think they fully understand these disability waiver situations either. I'm going to immediately request our Social Security earnings statements and schedule a meeting with our tax preparer to review all our past returns. It sounds like we can at least fix the last 3 years if we've been making this mistake. Thank you to everyone who has shared their experiences, especially those who explained the amendment process and Form SSA-7008. It's both frustrating and comforting to know that so many families are dealing with this same confusion. The lack of clear guidance when these exemptions were created has really left a lot of us in the dark. Has anyone found any official IRS or SSA publications that clearly explain this distinction for caregiver families? It would be helpful to have something definitive to share with tax preparers who might not be familiar with these situations.

I'm a newcomer to this community and just stumbled across this incredibly helpful discussion while searching for answers to the exact same problem! My wife and I have been caregivers for our adult daughter with cerebral palsy through our state's DD waiver program for almost 8 years now. We've had the difficulty of care exemption the entire time, and like so many others here, I'm now realizing we may have completely missed the self-employment tax requirement. Reading through everyone's experiences has been both eye-opening and terrifying. Our tax preparer has been handling our returns for years and never once mentioned Schedule SE or self-employment taxes related to our caregiving income. I just checked our most recent Social Security statements online, and sure enough, our reported earnings are much lower during the years we've been providing care. If we've been missing this for 8 years, that means we can only recover 3 years through amendments, potentially losing 5 years of Social Security credits permanently. That's a significant impact on our future retirement benefits that we never saw coming. I'm immediately scheduling appointments with both our tax preparer and looking for a specialist who understands disability waiver programs better. I'll also be calling our daughter's case manager to see what guidance they can provide - it's clear that families need much better education about these tax implications when entering waiver programs. Thank you to everyone who has shared their experiences and advice. This thread should be required reading for every family entering a waiver program!

I'm new to this community but found this thread while desperately searching for answers to this exact issue! My partner and I have been caregivers for our adult son with autism through our state's HCBS waiver for about 5 years. We've had the difficulty of care exemption from day one, and our tax preparer assured us we were "all set" with the exemption paperwork. After reading through all these experiences, I'm now terrified that we've been missing the self-employment tax piece entirely. I just logged into my Social Security account and confirmed my worst fears - our earnings records show significantly reduced income during our caregiving years. What's particularly frustrating is that when we first started the waiver program, nobody - not the case manager, not our tax preparer, not any of the program orientation materials - explained this distinction between income tax exemption and payroll tax obligations. It seems like such a critical piece of information that should be highlighted upfront. I'm scheduling an emergency meeting with our tax preparer this week and will be looking for a specialist who actually understands these waiver situations. Based on what I've read here, it sounds like we can at least recover the last 3 years through amendments, which is better than nothing. Thank you to everyone who has shared their experiences and advice - this thread is literally a lifesaver for families like ours who had no idea we were potentially missing out on years of Social Security credits!

I'm completely new to this community but just discovered this thread while frantically researching this exact same issue! My spouse and I have been providing care for our adult daughter with Down syndrome through our state's developmental disabilities waiver for about 6 years. We've had the difficulty of care exemption the entire time, and reading through everyone's experiences here has made me realize we've likely been making the same critical mistake with self-employment taxes. What's really striking me is how widespread this problem seems to be - virtually every family here has the same story of tax preparers not understanding the distinction between income tax exemption and Social Security tax obligations. It's clear there's a major gap in how this information is communicated when families enter waiver programs. I just pulled up our Social Security earnings statements online and confirmed what I was afraid of - significantly lower recorded earnings during our caregiving years. If we've been missing self-employment taxes for 6 years, we can potentially recover 3 years through amendments, but we may have permanently lost 3 years of Social Security credits. I'm immediately scheduling meetings with both our current tax preparer and searching for a specialist who understands disability waiver situations. I'll also be contacting our daughter's case manager to see what resources they might have - though based on what everyone has shared here, I'm not holding my breath for much guidance from that direction. Thank you to everyone who has shared their experiences and detailed advice about the amendment process and Form SSA-7008. This thread should honestly be pinned or featured prominently for new families entering waiver programs. The fact that so many of us are discovering this years later shows there's a real systemic problem that needs to be addressed!

I'm new to this community and just found this incredibly informative thread while researching the exact same issue for my family. We've been caregivers for my brother who has autism through our state's waiver program for about 4 years, and like so many others here, we have the difficulty of care exemption but I'm now realizing we may not have been paying self-employment taxes. What really stands out to me from reading everyone's experiences is how this seems to be a widespread systemic problem rather than isolated cases of confusion. The fact that tax preparers, case managers, and even program materials consistently fail to explain the distinction between income tax exemption and Social Security tax obligations suggests there's a fundamental communication breakdown that's affecting thousands of families. I'm going to immediately request our Social Security earnings statements and schedule meetings with our tax preparer and a specialist. Based on what I've learned here, we should be able to amend at least the last 3 years if we've been making this mistake. This thread has been absolutely invaluable - thank you to everyone who has shared their experiences and practical advice about the amendment process, Form SSA-7008, and finding knowledgeable tax professionals. It's clear that families entering waiver programs desperately need better upfront education about these tax implications to prevent this situation from continuing to affect more people.

I'm new to this community and just discovered this thread while dealing with the exact same situation! My wife and I have been caregivers for our adult son with intellectual disabilities through our state's HCBS waiver for about 7 years. We've had the difficulty of care exemption from the beginning, and our tax preparer always assured us everything was handled correctly with the exemption paperwork. After reading through all these experiences, I'm now deeply concerned that we've been missing the self-employment tax requirement entirely. I just checked our Social Security earnings statements online and they confirm my fears - our recorded earnings are dramatically lower during our caregiving years compared to before we started the program. What's most frustrating is discovering that this appears to be such a widespread issue affecting so many caregiver families. The complete lack of clear guidance when families enter these programs is inexcusable - this should be one of the first things explained during orientation, not something families discover years later when it may be too late to fully correct. I'm immediately scheduling appointments with our tax preparer and will be seeking a specialist who actually understands these disability waiver tax situations. From what I've learned here, we should be able to recover at least 3 years through amendments, though we may have permanently lost 4 years of Social Security credits. Thank you to everyone who has shared their experiences and advice about the amendment process, Form SSA-7008, and finding knowledgeable tax professionals. This thread should be required reading for every family considering or entering a waiver program. The systematic nature of this problem clearly shows there needs to be policy-level changes to ensure families are properly informed about these critical tax implications upfront.

I'm brand new to this community and just found this discussion while researching this exact issue for my own family situation. We've been caregivers for our adult daughter with cerebral palsy through our state's DD waiver program for about 3 years now, and we have the difficulty of care exemption as well. Reading through everyone's experiences here has been both incredibly helpful and alarming - it's clear that this confusion about self-employment taxes versus income tax exemption is affecting far more families than it should be. The systematic nature of this problem, where tax preparers, case managers, and program materials all seem to miss this critical distinction, suggests this is a major communication failure at the policy level. I'm going to immediately check our Social Security earnings statements and schedule a meeting with our tax preparer to review our past returns. Based on what I've learned from this thread, we should still be able to correct all 3 years through amendments if we've been making the same mistake. What strikes me most is how many families are discovering this years into their caregiving roles when the financial impact becomes much more significant. This information should absolutely be front and center in all waiver program materials and orientations. Thank you to everyone who has shared their experiences and practical advice - this thread has been invaluable for understanding what steps we need to take to protect our future Social Security benefits.

I'm new to this community and just discovered this incredibly detailed discussion while searching for help with the exact same issue! My husband and I have been caregivers for our adult son with developmental disabilities through our state's waiver program for about 4 years. We've had the difficulty of care exemption the entire time, and our tax preparer always told us we were "completely covered" by the exemption. After reading through everyone's experiences here, I'm now realizing we may have completely missed the self-employment tax requirement. What's really eye-opening is seeing how widespread this problem is - it's clearly not just individual families making mistakes, but a systematic failure to communicate these critical tax distinctions when families enter waiver programs. I'm going to immediately request our Social Security earnings statements and schedule an urgent meeting with our tax preparer. Based on what I've learned here, we should be able to amend all 4 years if needed, which is a relief compared to families who've discovered this much later. Thank you to everyone who has shared such detailed experiences and practical advice about the amendment process, Schedule SE, and Form SSA-7008. This thread should honestly be required reading for every family entering a disability waiver program. The fact that so many of us are learning about this years later shows there's a serious need for better upfront education about these tax implications. I'll definitely keep you all updated on what we discover!