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.