2023 medicaid waiver payments on W2 and 1099; both correctly deducted from Federal AGI but California return deducts the 1099 income twice - once with federal AGI and again on Schedule CA column B line 1d.
Schedule CA column B line 1d is only for "IHSS providers who received supplementary payment for sales tax on services they provided" according to the 2023 Form 540 instructions pg 58.
On my federal return:
a) the W2 medicaid waiver payments are reported on 1040 Line 1a and subtracted on Schedule 1 Line 8z with the note "IRS Notice 2014-7 excludable income [with amount included]" written to the left on line z; and
b) the 1099 payments are reported on 1040 line 1d and subtracted on Schedule 1 Line 8s. This correctly subtracts them both from the federal AGI.
Then, the TT automatically generated Schedule CA correctly applies the net Federal AGI that subtracts both medicaid waiver amounts but then, by TT also automatically putting the 1099 amount in Schedule CA column B line 1d, it subtracts the 1099-reported payments again, doubling the amount subtracted in the net CA AGI.
How do I fix this????
I have carefully walked through a manual processing of my tax returns and followed advice read here in the TurboTax community about how to handle these payments. I don't see any errors in my handling of these payments and I see no way to override what TT did to my state return.
To me it appears that there is a bug in the TT California form - that it is applying the criteria for reporting payments in Schedule CA column B line 1d globally to non-W2-reported payments even when they are not "supplementary payments", which instructions say are only to include sales tax paid to IHSS workers (a very narrow category that doesn't apply to most IHSS providers, including me.)
I urgently need help to sort this out. I'm trying to get help through TT Advantage (I am a member) but so far they have been unable to even understand the issue let alone help me. I'm waiting for a call back from an advisor but am losing hope that their process will connect me with an expert with relevant experience. So I'm trying here because I do see experts weighing in on issues like this! With hope and gratitude to those who will take the time to reply!!
