Please refer to the instructions below for how to enter
"Difficulty of Care" payments, which are exempt income under Notice
2014-7. This notice provides that certain payments received by an individual
care provider under a state Medicaid waiver program, are difficulty of care
payments and excludable as income.
If these payments are paid to you in box 1 of form W-2
(they should not have been), first try to get a corrected Form W-2 from the payer. If you
cannot get a corrected Form W-2, do not enter the W-2 in the Wages & Salaries topic.
Instead enter it as instructed below:
- Open your Federal return then click on
the Wages & Income tab
- Scroll down to Less Common
Income (you may have to click Show more income) and Show more
-
Start or revist Miscellaneous
Income, 1099-A, 1099-C
- Choose Other
Reportable Income and
select start or edit
- When you get to the screen
"Any other reportable income?" say Yes.
- Make the following two
entries:
1. Your first entry description
would be "W-2 EIN # number from W-2, Box 1 Medicaid Waiver
Payments," and enter the Box 1 amount as a positive number.
2. Next you will "Add
Another Miscellaneous Income Item," and enter the 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, Schedule 1.
If your W-2 has federal or state taxes withheld, you can
enter these amounts in Deductions &
Credits under Other Income
Taxes as Withholding not
already entered on W-2.
