I am assuming that you received a Form 1099-MISC as opposed to a Form W-2 for your IHSS Income. You are correct, both of your options end up with the same result, but it is necessary to use Option 2 because the IRS will be looking to match that income to your return. If you were to use Option 1 and not report the income at all, you would receive a notice from the IRS adding that missing income to your return.
Please click here for a very comprehensive answer regarding this situation by TurboTaxJulieH:
Excluding
IHSS Income Per IRS notice 2014-7
