You should be aware that difficulty of care payments are usually NOT reported on any tax form. In other words, you shouldn't be getting a W2. You simply ignore the DoC payments on your tax return. From the IRS notice on DoC payments:
- Generally the payor should not issue a Form W-2 or Form 1099-MISC Miscellaneous Income if they know the difficulty of care payments are excludable from your income. If you receive a Form W-2 or 1099-MISC reporting excludable difficulty of care payments, notify the payor that you are choosing to exclude the payments from your gross income. They should file and issue a corrected Form 1099-MISC or Form W-2C Corrected Wage and Tax Statement. Otherwise, use the previous information to report the income and exclusion.
In my experience (which is admittedly limited to my own situation and a handful of conversations with others), the organizations that make difficulty of care payments are already familiar with this policy and will automatically do the right thing and NOT send you a W2 or a 1099-MISC. If you are getting a W2, it would be worth talking to the source of your payments to be sure it actually does qualify as DoC, and if so, get them to correct it in their system. You don't want to inadvertently declare something as difficulty of care if it's actually wages.
