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In CCA 200347004, the IRS concluded that payments made to respite care providers for services performed in caring for foster care individuals are not excludable from income under Section 131. The Service also concluded that, for payroll tax reporting purposes, the respite care providers should be provided a Form 1099-MISC if the provider is an independent contractor, or a Form W-2 if the respite care provider is a common law employee of the government agency making the respite care payments. The IRS refrained from ruling on whether the respite care providers were independent contractors or employees, due to the general nature of the factual situations provided.
Facts. Government entities that place individuals in foster care also pay for respite care. Respite care services are provided to the foster care providers in order for them to have relief from the responsibilities of being providers. Respite care allows the foster care provider to take a vacation or to have a few hours off from the responsibilities of providing foster care.
Most respite care providers are certified by the states as qualified foster care providers for qualified individuals. Some respite care providers, however, may not be certified as qualified foster care providers (e.g., relatives of the foster care provider). Also, some respite care providers perform services in their own homes while others perform services in the homes of the foster care providers.
Regardless of whether the respite care providers are certified, the government agencies make payments directly to the respite care providers. Despite this, however, the government agencies provide little direction to the respite care providers in the performance of their services.
The CCA states that currently there is some degree of inconsistency among state...