Ihss medical payment waiver for CA Taxes

[PRIME4Q]

Hello. Live in provider. Exempt from ihss income being added to agi.  Have question about the  medical payments been entered on California return.

I know on feds you have to enter all or none of medical payment

However on CA tax website it's saying "

California return

Some or all of this income may be included or excluded in your federal adjusted gross income, which you report on your California return."

https://www.ftb.ca.gov/file/personal/income-types/in-home-support-services.html

So  can I enter some of the payments or must it be all or nothing same as feds. When I get to CA state taxes it asking me to confirm how much I want to reduce the amount.  I can enter a value From 0 to full amount of medical payments.

[MonikaK1]

If all of your IHSS income is excluded on your Federal return because it qualifies as "difficulty of care" payments (live-in provider) as explained in IRS Notice 2014-7, then you don't need to adjust your California return because you already reduced the amount on the Federal return.

See this help article, which was recently updated, for more information.

[PRIME4Q]

I kinda of see what your saying. I really don't need to exclude any on federal as I don't qualify  for much of anything as there is no other income.  If I can exclude some of the payments and not the full amount on CA return I can qualify for CA EITC. However if  I add all of the exemption I go over the limits set. Hence why I'm asking do I have to add all payments to CA. As the website was vauge if it's all or some for CA returns.

[CatinaT1 · Accepted solution]

You can exclude the full amount of difficulty of care payments in California, as well, to claim the EITC. You will have questions about the payments when you are completing the California portion of your return. 

[MonikaK1]

Yes, you can choose to exclude all or none of the IHSS income for EITC purposes on the California return, but not part.

Please see this California Department of Social Services webpage:

"If you received income from the In-Home Support Services (IHSS) program for providing care to someone you live with, you have the option to include or exclude all or none of that income as earned income on your tax return. This may allow you to qualify for CalEITC and other tax credits".  

Also: "you may choose to include all, but not part, of these payments in earned income for determining the EIC or the ACTC".

@PRIME4Q 

[dipsys]

How do I reduce the wages in the California State portion. The Federal wages are correctly reduced by the ihss payments amount. But the State portion is showing total wages which includes the ihss payments. Where do I go into the state tax entry to reduce this?

[MonikaK1]

If the wages were correctly reported on the Federal return as IHSS difficulty-of-care payments, then you shouldn't have to adjust anything on the California return. 

Please see this TurboTax help article on the subject; it was recently updated.

Review your W-2 and follow the steps in the article to make the entries in TurboTax depending on what is shown on your W-2.

If you follow the steps in the help article, and you are still having the IHSS income showing as taxable wages on your California return, you can send us a “diagnostic” file that has your “numbers” but not your personal information.  We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution. If you would like to do this, here are the instructions for TurboTax Online users: 

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up which says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

Here are the instructions for TurboTax Desktop users:

1. From the black bar at the top of your screen, select Online
2. Click Send Tax File to Agent
3. Click Send on the message that pops up
4. TurboTax will create a "sanitized" copy of your return information with no personal info
5. Post the 7-digit token number here in this thread

@dipsys