IHSS income, CA and Federal Tax Requirememts

[jsclower1]

My wife cares for our son, in home, and receives IHSS income.  The W2 received shows 40% of her income in Box1 and 60% in Box 12 (Code in 12a is II). W2 box 16 (CA wages) shows the same 40% of total income.  From what I see, box 12 is added and stripped from income in schedule 1.  What I do not understand is why any income is in Box 1 and 16 -- as these represent taxable income (no federal or state withholding was done, so the program shows us owing for that).  Everything I read says none of this income is taxable, yet here we are paying tax on it per the W2 sent.  Is there an income limit I cannot find?  Anything to do with hours being overtime?  Is there something to the 60/40 split?

Help.

[AmyC · Accepted solution]

1. The income in box 1 can be taxable or not. 

• If it is better for you to claim the income in order to receive Earned Income Credit or additional child tax credit,  then you should include it. See CA IHSS
• If it is not helpful, you may exclude the income, IRS Notice 2014-7.

2. No income limit or overtime. 

3. The IRS did change the rules during 2024. This timing change is affecting your box 1 and 12. See Live-In Provider Self-Certification Information states: Why does my W2 show no wages in {box 1} or State Wages in {box 16}?
If you are a Live In Provider who submitted a SOC 2298 your IHSS wages are not reported as income. Due to an IRS rule change implemented in 2024, exempt wages will be included in box 12-II of your W-2.

To subtract the w2 income:

1. go to the federal income section
2. scroll to the bottom
3. Miscellaneous Income, 1099-A, 1099-C, Start
4. Scroll to the bottom
5. Other reportable income, Start
6. Other taxable income?
7. Select YES
8. Description  -nontaxable IHSS wages
9. Amount, enter negative box 1 amount
10. Continue

I noticed on the IRS website, that they have a known issue with that code in box 12. You may want to wait to file your return, see Known issues and solutions.

[jsclower1]

AmyC - well done.  Life saver.  I owe you the beverage of your choice.