Yes, report this in this manner so that the exclusion appears correctly on your 1040.
- Record the amounts of say $2000 in Boxes 1,3,5. Leave Box 12 blank.
- Now go to "uncommon situations, then select "nontaxable Medicaid waiver payment" and enter the amounts correctly as directed.
- Now, this will appear as taxable income on Line 1 on your 1040 but then is excluded on Line 8 of the 1040.
I have seen posts that have said to record income in Box 1 and then make an entry in Box 12 but what this ends up doing is adding your income in Line 1A of the 1040 and then again in Line 1D of the 1040, thus doubling the income. Then there is an adjustment on line 8 for the amount of the Medicare waiver payments, but then you are still reporting income of $2000 after this is done.
The only other option in this case is to place a "zero" in Box 1 but then you won't be able to efile. In addition, you wouldn't be able to use this income for important credits like the EITC, child tax credits, retirement contributions, or other credits that you may be entitled to.
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