topic What do I put in the In-Home Support Services Supplemental Payment under CA State Tax section if we fall under the IRS Notice 2014-7 Medicaid waiver of payments? in After you file

What do I put in the In-Home Support Services Supplemental Payment under CA State Tax section if we fall under the IRS Notice 2014-7 Medicaid waiver of payments?

jmanjarrez1 — Thu, 06 Jun 2019 05:28:00 GMT

This not the same as the income exclusion under Notice 20...

TerryA — Thu, 06 Jun 2019 05:28:02 GMT

This not the same as the income exclusion under Notice 2014-7. That exclusion is taken in the federal return and Calif uses federal AGI so it's already excluded in your Calif return.

From the Calif Publication 1001:

California law allows an exclusion from gross income for IHSS
supplementary payments received by IHSS providers. IHSS
providers only receive a supplementary payment if they paid a
sales tax on the IHSS services they provide. The supplementary
payment is equal to the sales tax paid plus any increase in
the federal payroll withholding paid due to the supplementary
payment.

So only if you have supplementary payments should you enter anything there.

I am a provider for IHHS and I need to know what items ar...

omerlos11 — Thu, 06 Jun 2019 05:28:05 GMT

I am a provider for IHHS and I need to know what items are considered as supplemental payments?

So, there is no need to enter anything in the California...

user32745 — Thu, 06 Jun 2019 05:28:06 GMT

So, there is no need to enter anything in the California state return form, because California uses AGI from the Federal tax return form, and that income has already been excluded.?

Re: What do I put in the In-Home Support Services Supplemental Payment under CA State Tax section if we fall under the IRS Notice 2014-7 Medicaid waiver of payments?

ortizandrew47 — Sat, 08 Feb 2020 20:10:39 GMT

What do you mean by sales tax? Is it the same as Federal tax?

Re: What do I put in the In-Home Support Services Supplemental Payment under CA State Tax section...

BarbaraW22 — Wed, 12 Feb 2020 01:58:24 GMT

If you are asking if you need to make an additional entry on your state return for In-Home Support Services, then generally, you will not need to enter any additional information if everything was entered correctly on your federal return. (Please see the steps listed below.) Information on your federal return is automatically transferred to your state return and only certain adjustments are entered on the state return.

If you are asking how to report a supplemental payment other than In-Home Support Services where you lived with the recipient of the services, this generally would be taxable income and would be reported differently. Supplemental payments are Medicaid payments to providers that are separate from and in addition to the payments for services rendered to Medicaid enrollees. Examples of supplemental payments include quality initiatives and graduate medical education. These payments would be reported in the W-2 section under Wages and Income.

Per IRS Notice 2014-7 and the California Department of Social Services, wages received for In-Home Supportive Services by providers who live with the recipient of those services are not considered part of gross income for federal or state income tax purposes. This type of payment is specifically excluded from income; however, in a recent court case, it was ruled that Medicaid Waiver Payments are considered "earned income" for purposes of calculating the earned income tax credit. A taxpayer can choose to include Medicaid Waiver Payments as Wages on line 1 of Form 1040 (even if not reported on a W-2) in order to claim the credit. Then an adjustment is entered on Schedule 1, line 8 so the payments are not included in taxable income. Please see the steps below:

Log into TurboTax and click on any topic to continue
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 (even if this amount is not reported in box 1 of your W-2.) If you did not receive a W-2, per IRS Form 1040 Instructions, you may still enter the amount of Medicaid Waiver Payments in Box 1 for the purpose of claiming a credit.
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.

@Abgulati1

[Edited 02/11/20 | 5:33pm PST]

Re: What do I put in the In-Home Support Services Supplemental Payment under CA State Tax section...

SF1Rex — Sun, 17 Apr 2022 21:41:15 GMT

Reporting IHSS income for providers living with client has been explained in a very simple way. Thanks!

If you did not receive a W-2, per IRS Form 1040 Instructions, you may still enter the amount of Medicaid Waiver Payments in Box 1 for the purpose of claiming a credit.
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"

Re: So, there is no need to enter anything in the California...

dougk111 — Sun, 12 Jun 2022 18:52:45 GMT

On 6/11/2022 we received a **"Notice of Tax Return Change - Revised Balance"** demanding a balance of $694.00.
The FTB cited the CA AGI was miss reported, that the gross income should have been 14,210.00 higher. Yet the Federal AGI amount, which excluded IHSS Income, was transferred by Turbo Tax directly to the CA 540 form as instructed by CA's Instructions. The CA Form 540 says "Enter federal adjusted gross income from federal Form 1040 or 1040-SR, line 11 ........ 13"

This difference ($14,210.00) is from IHSS wages, which are considered in, my case, excludable.

In my federal return, I reported the IHSS Income as Misc Income with a negative figure and this explanation:

Per IRS Notice 2014-7 excludable income. IHSS "difficulty of care" payments, referred to as Medicaid Waiver payments are excluded from gross income pursuant to IRC section 131(c).

Does this mean the qualifying IHSS income should have been reported differently in Turbo Tax??

Re: What do I put in the In-Home Support Services Supplemental Payment under CA State Tax section...

dougk111 — Sun, 12 Jun 2022 18:52:59 GMT

This difference ($14,210.00) is from IHSS wages, which are considered in, my case, excludable.

In my federal return, I reported the IHSS Income as Misc Income with a negative figure and this explanation: