What if I have nontaxable Medicaid wavier payments for my business (Schedule C)?

If your business provides home care services, certain Medicaid waiver payments you receive may be nontaxable. If you receive Medicaid waiver payments on a Form 1099-MISC or Form 1099-NEC follow these steps:

1. Enter your Form 1099-MISC or Form 1099-NEC like normal.
2. Enter the amount as a Miscellaneous Expense on your Schedule C.
3. Enter "Notice 2014-7" as the Miscellaneous Business Expense Description.

Entering it this way will report the Medicaid wavier payment as income, then make it nontaxable by reducing that income by an expense of the same amount.