Entering the W-2 amount in box 1 will be treated as earned income making you eligible for earned income credit if you otherwise qualify. To prevent that amount being taxed, offset that amount as follows:
- To enter the offset for the payments(whether you chose to report as earned income or a 1099): Click on Wages and Income at the top. Scroll down to "Less Common Income"and click on Show More.
- Click on Start or Revisit next to Miscellaneous Income and then click on Start or Revisit next to Other Reportable Income and select "Yes" or "Add Another Income Item" if applicable
- In the "Description" section, enter "IRS Notice 2014-7 excludable income" and in the "Amount" section, enter the W-2 box 1 amount (or amount of IHSS Payments) as a negative (-) number
