Foster Care Question

[Lee B]

I have a client who is providing respite foster care (weekends only ) and receives $ 200 a day from the state of Oregon.

To out it into perspective, our state has a big shortage of foster parents and is currently paying third party agencies

$400 a day to house these kids in motels and hotels.

As I understand it these payments are not reportable or taxable.

TIA

Lee

[BulldogTom]

IRS Pub 4694 says they are not.   Pubs are not authority as you well know.

Tom
Longview, TX

[Medlin Software, Dennis]

As a long time FP, and failed twice, the payments are not taxable or reportable, unless you want to. This case sounds like one where the amount could actually lead to "profit", but still not reportable.

I know of no case where the payments for full time in a home cover the actual costs. Not even the medically fragile (with a much higher payment). Coupled with the regulations, red tape, and danger (yes, birth people are not all kind and do make threats), it is no wonder few step up. We always used pseudo names for the kids, so we would never be heard in public using their BC name. For visitation, we never allowed at our home, and used a vehicle normally garaged. We avoided the birth person(s) and handed off through a worker.

But, there is joy to be had as well, indescribable joy.

[DANRVAN]

 

 

2 hours ago, Lee B said:

As I understand it these payments are not reportable or taxable.

See section 131.

I would make sure that the payments are in fact for foster care.

Did they receive W-2s form DHS?

[Medlin Software, Dennis]

We never received a W2 for foster or respite care. Nor from adoption assistance payments (for hard to adopt children, and/or those with extra needs). Some will want to report it as income (and deduct expenses) as the income may be needed to get other benefits.

[Lee B]

My client just started this activity the beginning of last month so this will be for 2024.

I am trying to get on top of this so they don't have any big surprises when I do next year's return.

They went through the required DHS training and Certification last year so as far as I know it is foster care.

I did go to the Oregon DHS website and read about the specific program they are working under.

They found out about this program from their brother in law who works for DHS.

[Medlin Software, Dennis]

I should have said in my first reply, pass along kudos from another foster family!

[DANRVAN]

21 minutes ago, Lee B said:

I am trying to get on top of this so they don't have any big surprises when I do next year's return.

I have had clients receive payments and W-2s from DHS that were for non-foster care and taxable.

[Medlin Software, Dennis]

For the OP, it sounds like the FP is on the ball, as well as the preparer.

I have received W2 for IHHS amounts, which were not taxable because of the facts (before they cleaned up their W2 process). I have seen W2 received by a group foster setup, essentially a private group home, as it should be since it was a business enterprise. I have seen many messes with cross county payments/reporting (where the county is responsible for the management of the foster child, and found an out of county placement).

I cannot grasp having to house foster kids in a motel/hotel, but I can certainly see why. It must be somehow cheaper/faster than building a group facility. There is always the NIMBY issues as well.