catch 22

[eastside]

I am a paid parent for my disabled daughter, i do not receive a w2 i get a 2014-7 letter I was audited last year and was not happy with turbo tax because of well yeah being audited but the lack of knowledge when it came to my situation of a medicare waiver. I eventually got my refund and tried turbo tax again this year with added protection and audit defense and I got audited again! Now here is my questions why charge people for a service that they cannot use such as audit defense? Cause you offer the option of collecting your fee out of my taxes but if i get audited and go to use the said service I am not eligible because I didnt pay yet! Why cant your "professionals" have a note tracker type specific to the person tax situation?  I sat online for 4 hours a couple weeks ago just to explain my situation over and over to 4 different professionals! Does turbo tax professional no matter what level they are get educated in uncommon situations such a a medicare waiver status or a 2014-7 letter?

[CatinaT1]

Yes, we do know how to handle these situation. Did you enter your information as shown below? I am wondering if you were actually audited or if the IRS just asked for more information through correspondence?  What did your letter from the IRS state?

Tax-Exempt Medicaid Waiver Payments from IHHS  

TurboTax can exempt income under Notice 2014-7 per the IRS instructions for Medicaid Waiver payments from IHHS. This Notice provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program are difficulty of care payments and excludable as income. Additionally, you can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.     

This tax-exempt income can be reported to you differently depending on the State and County you live in. You might receive a W-2, 1099, and no form at all.   

See the instructions below for how to report this depending on how the income was reported to you.  

If you received a W-2 with $0 in Box 1:  

1. Sign in to TurboTax Online, click Continue to your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);     
2. Click on Federal Taxes, and then click on Wages & Income;     
3. Under Wages and Income, click Start;      
4. Click on Work on my W-2, and enter the information as reported on your W-2.     
5. After entering all your W-2s, you will see the screen, Let’s check for uncommon situations. Next to Nontaxable Medicaid waiver payments, check the box.  
6. You will enter the amount of Medicaid Waiver Payments into the box asking for the total amount of difficulty of care payment you received from IHHS. This will be the same amount reported in Boxes 3 and 5 of your W-2.  
7. When you get to the Earned Income Credit section under the  Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.  

If you received a 1099 or no form:  

1. Sign in to TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);     
2. Click on Federal Taxes, and then click on Wages & Income;     
3. Scroll down to Less Common Income;       
4. Click on Start next to Miscellaneous Income, 1099-A, 1099-C.  
5. Click on Start next to, Other income not already reported on a Form W-2 or Form 1099;      
6. Answer Yes to Did you receive any other wages?;      
7. Leave blank the box for Wages earned as a household employee and click continue;  
8. Leave blank the box for Sick or disability pay and click continue;       
9. Enter the amount of Medicaid waiver payments on Certain nontaxable Medicaid waiver payments not reported on Form W-2, and click Continue.  
10. When you get to the Earned Income Credit section under the  Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.  

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

[eastside]

I actually had one of your people go over my return because of last year, I actually asked for a supervisor to look at it. She actually led me through the process of making a w2 to go along with my 2014-7 letter which was pretty cool! My irs letter said nothing was needed from me at this time which I called my tax advocate who helped me last year to see what I should do because she put it in the notes when she solved my problem last year that i was a paid parent that only receives a 2014-7 letter. She told me to call irs wage verfication dept but i couldn't get to that dept directly.  I guess I just dont understand why after my tax are filed i cant get any help nor use the services that I will be paying for.  I am sorry its super frustrating that this happened 2 years in a row and again I am left to fend for myself and will have to go through the tax advocate service in june

[CatinaT1]

It's interesting that someone at TurboTax told you to make a W2. I'm thinking that is why you are having problems. You are reporting it as a W2 and the IRS does not have a W2 to match it up to. In this case your return would get kicked out to go though manual processing that takes a lot of time. 

In the future, you need to enter it as Miscellaneous Income since you have no form. 

If you received a 1099 or no form:  

1. Sign in to TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);     
2. Click on Federal Taxes, and then click on Wages & Income;     
3. Scroll down to Less Common Income;       
4. Click on Start next to Miscellaneous Income, 1099-A, 1099-C.  
5. Click on Start next to, Other income not already reported on a Form W-2 or Form 1099;      
6. Answer Yes to Did you receive any other wages?;      
7. Leave blank the box for Wages earned as a household employee and click continue;  
8. Leave blank the box for Sick or disability pay and click continue;       
9. Enter the amount of Medicaid waiver payments on Certain nontaxable Medicaid waiver payments not reported on Form W-2, and click Continue.  
10. When you get to the Earned Income Credit section under the  Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.