topic Medicaid waiver for reportable income in Get your taxes done using TurboTax

Medicaid waiver for reportable income

1502181959 — Thu, 10 Mar 2022 19:22:20 GMT

We receive a W-2 for wages received that are non-reportable due to Notice 2014-7. The income received comes from Medicaid. This income is reported on Schedule1 line 8z (ie W-2 says $15,000 of income, entry on Schedule 1 line8z would be -$15,000. How can I get this entered on this form without the override option? Because the override entry has been used an error message comes up not allowing me to electronically send the tax from. I can print the form and mail the return but would rather send it electronically.

Re: Medicaid waiver for reportable income

JamesG1 — Thu, 10 Mar 2022 21:55:52 GMT

Do not use an overriding entry.

Per IRS Notice 2014-7, payments from a state Medicaid Home and Community-Based Services program are considered "difficulty of care" payments and are specifically excluded from gross income for income tax purposes. Please see this IRS article for more information.

For the W-2 with an amount reported in box 1, please follow the steps below to enter it on your tax return. You will enter it as wages and then enter an adjustment on Schedule 1, line 8 so the payments are not included in taxable income.

In TurboTax Online, follow these steps.

Click on Federal from the menu on the left-hand side and then click on Wages & Income at the top
Click Edit/Add next to Job (W-2) and then click on Add a W-2
If you received a W-2 for your Medicaid Waiver Payments, enter the information as reported on your W-2. Enter the amount you received for Medicaid Waiver Payments in Box 1.
Continue through the screens until you get back to "Wages and Income" section and then 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 next to Other Reportable Income and select Yes.
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 Medicaid Waiver Payments) as a negative (-) number.

NOTE: This will both show the W-2 on your return and explain why it is not taxable.

Re: Medicaid waiver for reportable income

1502181959 — Fri, 11 Mar 2022 15:18:59 GMT

Thank you for the response. Your instructions were excellent and accurate! I was able to file electronically after correcting the errors.