IRS rule 2014-7

[ptkt3860]

My w-2 has "0" in box 1.All my difficulty of care payments are listed in box 16.Where do I list this income in my Colorado taxes?  Or federal taxes?

[JamesG1]

Enter the W-2 as prepared.  Since the W-2 reports $0 Federal income and a positive dollar amount in box 16, it appears that what you received is considered taxable by the state of Colorado.  Are you able to enter the W-2 as it is written?

Difficulty of care payments are not taxable or reportable on the Federal income tax return.  IRS Notice 2014-7 can be found at this link and explains that certain Medicaid Waiver Payments for In-Home support services are excludable from gross income and should not be included in your earned income.  This is the case even if you have received a W-2 for performing these services.

This Colorado directive explains that some payments received in Colorado qualify for treatment as an exclusion and some do not.