The IRS has now declared in Notice 2014-7 that In-Home Supportive Service (IHSS) payments are now not subject to income tax under Section 131.  See this explanation by the IRS on their website: 

http://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income

Check with your state to see if the IHSS payments are non taxable there, too (In California they are tax free).  The ruling was in January 2014,  but the IRS says it will affect any open tax years, so those previous years can be amended to get refunds on this change.

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