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REV. MAY 3, 2018 NEBRASKA DEPARTMENT OF MEDICAID ELIGIBILITY MANUAL LETTER #43-2018 HEALTH AND HUMAN SERVICES 477-000-051

477-000-051 – Partnership/S-Corporation Income

For MAGI:

S-Corporations and Partnership do not need to be reviewed by Central office as all business expenses are allowed per MAGI-based methodologies. If the Hub does not produce a match to verify the client’s attested income, the income amount reported on the client’s personal return (with all schedules and attachments) along with their schedule K-1 issued from the S-Corporation and/or Partnership should provide enough information to make a determination of the countable income.

For Non-MAGI:

S-Corporations and Partnership returns do need to be reviewed by Central Office.

Schedule E  When a household’s Federal Income Tax return (1040) shows income or a loss on Line 17, the amount shown will also be reflected on their Schedule E (“Supplemental Income and Loss”).  The Schedule E will indicate the type(s) of supplemental income or losses being reported. Part I of the Schedule E shows “Income or Loss from Rental Real Estate and Royalties,” and most expenses shown on Side 1, except for depreciation & depletion, are allowable.  Part II of the Schedule E, “Income or Loss from Partnerships and S Corporations,” will indicate to the case manager if the household is involved in a Partnership or an “S” Corporation.  If there is an entry in Part II of the Schedule E, the case manager must request tax documents in addition to the household’s Federal Income Tax return (1040) based on the type of income or a loss reported:

Partnerships:  If Part II of the Schedule E shows a “P” in the area designated “Enter “P” for partnership; “S” for S Corporation,” the household is involved in a Partnership. o This means that the case manager will need to request certain IRS documents which are related to the status and income of the Partnership. The following IRS documents will be needed in order to determine the countable Partnership income:  *IRS Form 1065 U.S. Partnership Return of Income – usually four pages in length, however, the “balance sheet” may not be included if it is not used;  Schedule K-1 Form 1065 Partner’s Share of Income, Credits, Deductions, etc. – two pages in length, but sometimes the second page is not completed;  (As Appropriate) – If the Partnership is involved in a farming operation, the Partnership must file a Schedule F.

*Each partner in the Partnership should either have or be able to obtain a copy of the Partnership return and appropriate schedules.

“S” Corporations  If Part II of the Schedule E shows an “S” in the area designated “Enter “P” for partnership; “S” for S corporation,” the household is involved in an “S” Corporation.