If you are caring for your son in your home under a Medicaid Waiver Program, you should not be getting a W-2 or 1099 for this
income, as Medicaid Waiver Payments are generally non-taxable income. Your first step should be to contact your agency and refer them to IRS Notice 2014-7 . Ask them to correct the W-2, if necessary, to show zero wages.
If they refuse, you will have to report the amount on this W-2 as
income, because it's being reported to the IRS. Then you will make a second entry to zero out the income reported in Box 1 of the W-2 referencing the IRS Notice 2014-7.
To enter the exemption from income:
- In your Federal Return, choose the Wages & Income tab.
- Tab through or Scroll down to Less
Common Income and Show more
-
Start/Revisit Miscellaneous Income and choose Other
reportable income
- Say Yes to continue to the screen "Other
Taxable Income".
Enter the description "Notice 2014-7" as the description and the
amount as a negative number.
A corresponding negative amount will be entered, making your taxable income from this W-2 effectively zero.
