Tax Information for
Host Home Providers

Momentum is Built on Trust - Including How We Handle Taxes

Understanding how taxes work as a host home provider is an important part of maintaining compliance and protecting your income. Because providers are considered independent contractors, not employees, you are responsible for reporting your earnings and managing your own tax obligations. This section will walk you through what forms to expect, what income may or may not be taxable, and how setting up a business structure like an LLC can impact your reporting. Our goal is to give you clear, accurate information so you feel confident and prepared.

independent contractor

What Is an Independent Contractor?

An independent contractor is a person who provides services to another individual or organization under a contract but is not an employee. Independent contractors work for themselves, control how they do their work, and are responsible for managing their own taxes and business-related expenses. In shared living or host home settings, this means the provider:

Offers services out of their own home
Has control over their daily routine and household operations
Is not supervised like an employee
Does not receive employee benefits like paid time off or health insurance

Becoming a Independent Contractor

When you work as an independent contractor, you have two main options for how you receive payments and report taxes:

Use your personal Social Security Number (SSN)
Set up a Limited Liability Company (LLC) with an Employer Identification Number (EIN)

Both options are legal, but they have different implications.

Option 1: Using Your SSN as an Individual

Pros:

No setup required
Takes less effort
Simple tax filing (everything is under your personal return)

Cons:

Your personal name and SSN go on all tax forms
No liability protection, meaning if someone sues you, your personal assets could be at risk
Harder to separate business vs. personal expenses

Option 2: Forming an LLC

Pros:

Liability protection: separates your personal assets from business liabilities
You can get an EIN (like a business SSN), so you do not have to use your SSN
Easier to open a business bank account and manage expenses
You can choose to be taxed as a sole proprietorship or later elect S-Corp if income grows

Cons:

You must register with the state (in Missouri, this is through the Secretary of State)
Filing costs: around $50 in Missouri (one-time fee)
Still responsible for your own taxes, recordkeeping, and business operations

How to Become an LLC in Missouri

Choose a name for your business (e.g., “Your Name Care Services LLC”)
Go to the Missouri Secretary of State website: https://bsd.sos.mo.gov/
File Articles of Organization for an LLC ($50 online)
Apply for an EIN (Employer Identification Number) through the IRS (free): https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
Open a business bank account
Use your LLC name and EIN when filling out W9s and contracts

You can also choose to use a company to help you establish your LLC and handle filings, such as LegalZoom, ZenBusiness, Incfile, or Northwest Registered Agent. These services guide you through the process of registering your LLC with the state, obtaining an EIN from the IRS, and sometimes even provide extras like an operating agreement or registered agent services. While they charge a fee, they can save you time and reduce the chance of filing errors, especially if you're unfamiliar with the process.

Do I Need an LLC?

No, many host home providers use their SSN and operate just fine. However, if you want more protection, privacy, and professionalism, forming an LLC is worth considering.

Taxes

taxes

What Is a W-9 Form?

A W-9 is an IRS form used to collect your taxpayer information so that The Momentum Project can report your income accurately at the end of the year. As a host home provider, you will complete a W-9 before you begin receiving payments.

The form asks for:

Your full legal name or business name
Your tax classification (individual, sole proprietor, or LLC)
Your Social Security Number (SSN) or Employer Identification Number (EIN)

We use the information from your W-9 to issue a 1099-NEC showing how much we paid you for services during the year. The W-9 itself does not get sent to the IRS — it stays in our internal records. You only need to fill it out once, unless your name, business type, or tax ID number changes.

What Is a 1099?

A 1099-NEC (Nonemployee Compensation) is the specific form used when a person earns $600 or more from a business or agency in a year without being an employee. If you are paid as an independent contractor (instead of through payroll), you will receive this form.

As a Host Home Provider, What Does This Mean for You?

You are not an employee
Your income is reported to the IRS on a 1099 form instead of a W-2
You are responsible for paying your own taxes
You may be eligible to deduct expenses related to providing care
Some payments (like difficulty of care) may be exempt from taxes, but you must still receive a 1099

When Will I Receive My 1099?

The Momentum Project will send your 1099-NEC by January 31st each year, covering the total amount you were paid during the previous year.

What Should I Do With It?

You’ll use your 1099-NEC when filing your income taxes. It shows how much you earned, and you’ll report that income on your personal or business tax return. Since taxes are not withheld from these payments, you may owe income tax and self-employment tax unless you're eligible for exemptions (such as for difficulty of care payments).

We recommend:

Saving a copy for your records
Keeping track of related expenses (food, utilities, mileage, etc.)
Consulting a tax professional — especially one familiar with Medicaid-funded services

What Does The Momentum Project Do With It?

We are required by law to:

Report your income to the IRS using the information from your W-9
Issue you a 1099-NEC if you earned $600 or more
File a copy with the IRS to comply with federal reporting requirements

This helps ensure transparency and compliance for both you and our agency. Even if some of your income is non-taxable (such as difficulty of care), we are still required to report the full amount paid.

1099 Common Misunderstandings

“I don’t want the IRS to know about me. Why are you sending them a 1099?”
We understand that some providers are nervous about having their income reported, especially if they’ve worked with agencies that never issued a 1099. However, not reporting income doesn’t make it disappear, it simply increases the risk of problems later. By submitting a 1099, we are protecting both you and The Momentum Project by doing things the right way. This does not mean you are in trouble or being flagged. The IRS expects this income to be reported, and sending a 1099 does not automatically mean you’ll owe taxes. You may qualify for deductions or exemptions, especially if some or all of your income is categorized as difficulty of care.

“Another agency told me 1099s aren’t required.”
That is incorrect. If you are paid $600 or more as an independent contractor, the IRS requires a 1099-NEC to be issued. Agencies that do not follow this rule are not in compliance and may be putting providers at risk without their knowledge.

“I worked with a nonprofit as a host home before, so I did not have to pay taxes.”
Being paid by a nonprofit does not make your income tax-free. If you are not an employee receiving a W-2, you are still responsible for reporting and paying taxes on your income regardless of the agency’s nonprofit status.

“Other agencies said they pre-tax payments.”
Independent contractors are not taxed through paycheck withholdings like employees. If another agency did not issue a 1099, they were not pre-taxing, they simply weren’t reporting the income, which is incorrect and could create audit risks for you later.

“A 1099 means I’ll owe more in taxes.”
Not necessarily. A 1099 means you are responsible for reporting the income yourself. Depending on your situation, you may be able to reduce or eliminate what you owe by claiming deductions (like food, utilities, and mileage) or by applying the difficulty of care exemption.

“Can’t you just avoid sending the 1099 to the IRS?”
No. As an agency receiving Medicaid funding, we are legally required to report this income. Choosing not to report it would risk our license, your eligibility to provide services, and future funding for individuals we serve.

“Talking to an agency is enough to understand taxes.”
We are happy to explain what forms we issue and why, but we are not tax professionals and cannot give personal tax advice. Every provider’s financial situation is different. For the most accurate and personalized guidance, please speak with a qualified tax advisor who understands independent contracting and Medicaid-related services.

Understanding Your Taxable Income

Host home providers may receive multiple types of payments. Here's how they are treated:

Room & Board Payments: These are considered taxable income and must be reported.
Compensation Payments/ Difficulty of Care (DOC) Payments: These payments may be exempt from income tax under IRS Section 131
- Even if your DOC payment qualifies for the exemption, we are still required to report the full amount on your 1099. You (or your tax preparer) will apply the exemption when filing your return.
- Difficulty of Care (DOC) payments are funds provided to a host home provider for the purpose of supporting an individual with physical, mental, or emotional needs. These payments are meant to compensate the provider for the extra care and supervision required beyond typical room and board.

Visit the IRS website to read more about difficulty of care payment:

IRS Website

How Using an SSN vs. an EIN Affects Your Taxes

Using a Social Security Number (SSN)

When you use your Social Security Number, you are operating as an individual. Payments made to you for providing host home services are tied directly to your personal identity. You’ll receive a 1099-NEC form showing your total earnings, and you will report this income on your personal tax return. You are responsible for paying both federal income tax and self-employment tax (which covers Social Security and Medicare). You may deduct allowable expenses related to providing care such as portions of utilities, food, or household items, but it’s important to keep accurate records. There is no legal separation between your business income and personal finances when using your SSN.

Using an Employer Identification Number (EIN)

An EIN is like a Social Security Number for your business. To use an EIN, you typically form a Limited Liability Company (LLC). Payments are then issued to your business rather than directly to you as an individual.

You still report the income and pay self-employment taxes, unless you elect a different tax status (like S-Corp). However, using an EIN provides several advantages:

You don’t have to share your personal SSN on forms like the W-9.
You can open a business bank account to separate finances.
You present yourself more professionally as a care provider.
You may find it easier to track deductions and organize records.

Will My Taxes Be Lower With an EIN?

Not automatically. Your tax rate does not change just because you have an EIN. However, separating your business income from your personal income can make it easier to manage expenses and claim appropriate deductions. If your business grows or you support multiple individuals, you may also benefit from future tax-saving opportunities available to LLCs or S-Corps.

Bottom Line

Both SSN and EIN are legal ways to receive payment as a host home provider. The key difference is in how you manage your business identity, privacy, and recordkeeping. If you’re planning to provide services long-term or want a more professional setup, forming an LLC and using an EIN may be worth considering.

We’re Doing the Research So You Don’t Have To

We know finding a tax advisor who understands host home services and Medicaid waiver payments can be challenging. That’s why we’re actively researching and connecting with professionals who are familiar with difficulty of care exclusions, 1099s, and independent contractor tax responsibilities. We’ll be updating this section soon with trusted resources you can turn to for reliable support.

In the meantime, we recommend reaching out to a local CPA and asking if they have experience with Medicaid-funded programs or foster care tax treatment as many of the same principles apply.

If you'd like to be notified when this list is updated, feel free to contact us.

tax advisors

Tax Information for Host Home Providers