I received a form from the IHSS Notice 2014-7 That I needed to fill out a form (SOC 2298)

[osmarandsara]

The IRS has ruled that IHSS wages received by IHSS providers who live in the same home with the recipient of those services are to be excluded from gross income for tax purposes (IRS notice 2014-7).

Basically that means that in the past, you should not have been getting a W2  (or it should have indicated "0" income in box 1).    The SOC 2298 should be filled out so that in the future your IHSS income will be designated as "tax exempt" so that you either stop getting a W2 or that future W2s should show "0" income in Box 1.

For 2016, however, you will still get a W2.    To complete your taxes you can do this:

"Certain Medicaid waiver payments are treated as difficulty-of-care payments when received by an individual care provider for care of an eligible individual (whether related or unrelated) living in their home.

Medicaid Waiver Payments for In-Home support services are excludable from gross income and should not be included in your earned income.

If these payments are paid to you in box 1 of form W-2 (they should not), first try to get a corrected Form W-2 from the payer. If you cannot get a corrected Form W-2, follow one one of these two steps:

• Exclude these payments from your return:
  Do not include this W-2 in your return. The IRS may contact you to explain why the payments were not included on your tax return.
  You can explain that the payments are excludable from gross income under Notice 2014-7 as payments for In-Home support services.
• Do not enter the W2 in the Wages & Salaries topic.
  Instead, to enter these payments:
  
  1. In the Wages & Income section, go to the Less Common Income section and select Startnext to Miscellaneous Income, 1099-A, 1099-C
  2. On the next screen, select Start next to Other Reportable Income and answer Yes on the next screen
     
  3. You will now make two entries on the Other Taxable Income screen:
     1.  Your first entry description would be W-2 EIN # (enter EIN number from W-2) Box 1 Medicaid Waiver Payments, and enter the Box 1 amount as a positive number.
     2. Next click "Add Another Miscellaneous Income Item," and enter this description: IRS Notice 2014-7 excludable income and enter the W-2 Box 1 amount as a Negative (-) number.
        
        This both shows and explains removing the W-2 income, placing a zero on Line 21 of your Form 1040.

If your W-2 has federal or state taxes withheld, you can enter these amounts as follows:

1. In the Deductions & Credits section, go to the Estimates and Other Taxes Paid section.
2. Select Start next to Other Income Taxes, and answer Yes on the next screen if necessary
3. On the Other income taxes screen, go to the Other Income Taxes Paid in 2016 section.
4. Select Start next to Withholding not already entered on a W-2 or 1099, and enter the amount on the next screen.

For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445.

[Jim-Bob-61]

By following the above steps, everything worked out great. However, when trying to e-file for CA, it says income source and withholdings aren't from a W2, 1099 etc... so Turbo Tax will not let you e-file. A way around this beside mailing it in?

[apriluv]

Just happened to me! Looking for an answer if this is why I'm being state rejected. Sounds like it is. The only difference this year from several years past is that this year I also needed to claim a credit for the taxes that I paid out! so I had to do the second step mentioned here to get it refunded. I guess that's why?

[apriluv]

Did you mail it in?

[Jay36]

Same thing happened to me. Did you find the fix or just mailed?

[Jim-Bob-61]

Sorry for the delay... Looking back at my 2016 returns, yes, I filed the state by mail. Last year had no issues and filed electronically. This year, I didn't receive a W2 at all since the income for the entire year was non-taxable income (not subject to any tax, Soc Sec or FICA etc...) I did receive a letter from IRS stating I failed to report income for 2016. I replied back that I did and if they would read the return (where Turbo Tax explains how to submit it) and followed their own rules they would understand how/why I did the return. Got a reply back that said, true - case resolved. 🙂 If all else fails, just mail in the state form and save the $20 filing fee. Hope that helps.

[Jwvassla]

So did you efile or print and mailed?

[Nero1]

But this answer says we should first put our IHSS wages under the Wages and Income section, not the 1099 section: https://ttlc.intuit.com/community/taxes/discussion/ihss-in[product key removed]eld/00/1210967

Does it matter if we put the positive amount of our IHSS wages under Wages and Salaries, as that answer stated, or should we put them under Miscellaneous Income, 1099-A, 1099-C, as you say?

So we shouldn't enter the taxes withheld under Wages and Salaries, but we should enter them under Withholding not already entered on a W-2 or 1099? And should we create three separate entries for our W2's Federal income tax withheld, Social Security tax withheld, and Medicare tax withheld, and with all three under Federal Withholdings?

[JotikaT2]

If you have federal income taxes, Medicare tax withholding, and Social Security tax withholdings, please enter the income under the W-2 wages section of the program to ensure the amounts are all picked up correctly.  

Enter the offset as provided in the prior post.

[Nero1]

Do I also enter the Medicare, federal, and social security taxes in the W2 wages section? And do I enter negative numbers for them in another section to offset them?

[ronnywbarham]

well its horrible how turbo tax does their software now.  I thought I bought the software, but all they gave me is a click here and click there and then shut me down.  I need to make adjustments to my return and they say I have to wait a month!  sorry turbo tax I want a refund!  your software is useless to me if I cant use it more than once and have to pay so much for that!