Will paying mother-in laws companions by check but not filing tax paperwork for them affect her getting Medicaid?

I think you should seek advice from an elder law attorney who can help you decide how to handle this. The law may vary depending on the amount you paid out. The fact that the money was used for her care shouldn't be a problem with Medicaid. I'm more concerned about a penalty for not paying taxes. That isn't my in my field of expertise. Since I like to be "safe," if it were me, I'd have an attorney look into this obligation.
Good luck,
Carol

Yes we are - thank you

Michael - the old caregivers are not going to be happy about having to deal with tax issues from the past. I imagine they were viewing their caregiving as all under the table income? Whomever does moms Medicaid application will have to document that payments were made for caregiving otherwise it will be viewed as gifting. Your lucky you have the cancelled checks to document all this. I'd try to see if Medicaid will accept the cancelled checks and some sort of invoice with caregiver name, date & amount first before opening the IRS pandoras box. If Medicaid wants more, you may have to get caregivers cooperation in all this (w9,w2,i9) & likely you'll need to pay their penalty & late taxes to get this.

But I have a couple of ?'s - you say the RM was paid off, correct? So what happened with the house? Did you let mortgage holder just take it over? or did you sell it to on open market & pay off the RM, & was there any proceeds left? Did family buy the house, & if so at full fair market value? Did RM holder do any devaluation on the mortgage owed at settlement?

You better dig out the contracts you had with each companion, because I'm willing to bet they did not declare the wages. Medicaid will interpret those payments as "gifts" unless you can prove otherwise.