topic How to file notice 2014-7 in After you file

How to file notice 2014-7

ericag9218-gmail — Tue, 10 Feb 2026 09:59:54 GMT

Hello. I received a 1099-MISC for the medicaid waiver program, how do I file that online? I keep seeing file it as a w-2, but I didn't receive it as a w-2, I received it as a 1099 MISC.

Re: How to file notice 2014-7

DoninGA — Tue, 16 Jan 2024 14:11:13 GMT

See this TurboTax support FAQ for the Medicaid waiver with a Form 1099 received - https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-w-2/qualified-medicaid-waiver-payments-w-2-show-earned/L1XZa89dh_US_en_US?uid=lrgfktd4

Re: How to file notice 2014-7

CatinaT1 — Wed, 17 Jan 2024 13:58:38 GMT

Tax-Exempt Medicaid Waiver Payments from IHHS

TurboTax can exempt income under Notice 2014-7 per the IRS instructions for Medicaid Waiver payments from IHHS. This Notice provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program are difficulty of care payments and excludable as income. Additionally, you can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.

This tax-exempt income can be reported to you differently depending on the State and County you live in. You might receive a W-2, 1099, and no form at all.

See the instructions below for how to report this depending on how the income was reported to you.

If you received a W-2 with $0 in Box 1:

Sign in to TurboTax Online, click Continue to your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);
Click on Federal Taxes, and then click on Wages & Income;
Under Wages and Income, click Start; 
Click on Work on my W-2, and enter the information as reported on your W-2.
After entering all your W-2s, you will see the screen, Let’s check for uncommon situations. Next to Nontaxable Medicaid waiver payments, check the box.
You will enter the amount of Medicaid Waiver Payments into the box asking for the total amount of difficulty of care payment you received from IHHS. This will be the same amount reported in Boxes 3 and 5 of your W-2.
When you get to the Earned Income Credit section under the Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.

If you received a 1099 or no form:

Sign in to TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);
Click on Federal Taxes, and then click on Wages & Income;
Scroll down to Less Common Income; 
Click on Start next to Miscellaneous Income, 1099-A, 1099-C.
Click on Start next to, Other income not already reported on a Form W-2 or Form 1099;
Answer Yes to Did you receive any other wages?;
Leave blank the box for Wages earned as a household employee and click continue;
Leave blank the box for Sick or disability pay and click continue;
Enter the amount of Medicaid waiver payments on Certain nontaxable Medicaid waiver payments not reported on Form W-2, and click Continue.
When you get to the Earned Income Credit section under the Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.

For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs.

Re: How to file notice 2014-7

BigRabit1 — Wed, 19 Feb 2025 19:14:32 GMT

Hi Catina,

Thank you for the detailed answer. I received a w2 for this situation in CA.

1. However, after I filled in the w2 info as you indicated in my TurboTax Desktop Software, I ran into some problems. I tried to fill in Earned Income Credit section as you said, but the system says "It turns out you don't qualify for this credit".

2. I tried to fill in box 1 with the same number in Box 3 mentioned here as well. I still got the same response in Earned Income Credit section.

What should I do?

Should I just delete the number from Box 12A? It seems like Turbo thinks the wages in 12A is taxable.

Re: How to file notice 2014-7

MonikaK1 — Thu, 20 Feb 2025 02:22:02 GMT

We are in the process of updating the Help Article referenced by @DianeW777 on this topic due to issues with the new W-2 Box 12 code ii introduced this year. Also, returns can't be e-filed if they contain a W-2 entered with zero in Box 1.

Since you have a zero in Box 1, you can enter your W-2 in Miscellaneous Income as @Vanessa A recommended.

If your W-2 reported IHSS income that wasn't excludable as difficulty-of-care, then you should enter it in the W-2 section.