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REV. JANUARY 1, 2014 NEBRASKA DEPARTMENT OF MEDICAID ELIGIBILITY MANUAL LETTER #17-2014 HEALTH AND HUMAN SERVICES 477-000-051

o An “S” Corporation is a pass-thru small business. All income and expenses pass thru to the individual shareholders by their percentage of ownership. The following IRS documents will be needed in order to determine the countable “S” Corporation income:

 *IRS Form 1120S U.S. Income Tax Return for an S Corporation– four pages in length;  Schedule K-1 (Form 1120S) – Shareholder’s Share of Income, Deductions, Credits, etc. – two pages in length;  (As Appropriate) – If the “S” Corporation is involved in a farming operation, the corporation must file a Schedule F.

*Each shareholder of an “S” Corporation should either have or be able to obtain a copy of the 1120S, their Schedule K-1, and other corporate schedules as appropriate.

Other information Part II of the Schedule E will also show if the involvement in the Partnership or “S” Corporation is passive or nonpassive. If the involvement is passive, the income is treated as unearned income. If the involvement is nonpassive, the income is treated as earned.

If a household member is an employee of a regular, or “C” Corporation, s/he will receive a W-2; income from this source is reported on Line 7 of their 1040 and is treated as regular wages. A copy of the Corporate tax return, IRS Form 1120, is not required, only verification of the income received from the Corporation.

As a general rule, when more documentation is initially provided, a more prompt determination of countable income can be made. When submitting documents to Medicaid Long-Term Care Policy for a determination of countable income, please include the household’s 1040, any schedules (such as the Schedule A, Schedule E, Schedule F, etc.) accompanying the household’s tax return and the business return (as appropriate).