Yes, the same tax-exemption rule generally applies to you. Under IRS Notice 2014-7, if you provide care (including IHSS and certain respite services) and live in the same household as the recipient, that income is considered a "difficulty of care" payment and is excludable from your federal gross income. California also follows this rule for state taxes.
Why OneWell is taking taxes out
OneWell is a third-party agency. Unless you have officially certified with them that you live in the same household, they are legally required to treat you as a standard employee and withhold taxes.
How to stop the withholding
To stop federal and state income taxes from being taken out of your future checks, you typically need to file a Live-In Self-Certification form with your employer/the state. Form SOC 2298: This is the standard California form for IHSS providers to certify they live with the recipient. Here is a link to the form to download, print, and submit to them.
OneWell Internal Forms: Since OneWell is the employer of record for your respite hours, they likely have their own version of a "Notice 2014-7 Self-Certification" or a "Live-In Provider" form. You should ask their HR department specifically for the "IRS Notice 2014-7 Exemption Form."
Since you already filed your taxes and likely included this income, you may have overpaid. You will need to amend your return to receive a refund for those taxes. If you used TurboTax, here is how to amend.
Amending your taxes in TurboTax to exclude IHSS/Respite income under IRS Notice 2014-7 is straightforward, but the steps depend slightly on whether you received a W-2 or a 1099. Since you mentioned getting taxes taken out, you likely have a W-2.
Here are the exact steps to file your Form 1040-X (Amended Return) within TurboTax:
Start the Amendment( TTO version)
- Sign in to TurboTax.
- On the Tax Home page, scroll down to Your tax returns & documents.
- Select the year you want to amend (e.g., 2025) and click Amend (change) return.
- In the pop-up, select Amend using TurboTax Online (or follow the prompts to open your desktop file).
- When asked "What do you need to change?" choose Wages & Income.
- Navigate to Federal > Wages & Income.
- Find your W-2 from OneWell and click Edit/Update.
- Review the info (keep everything exactly as it is on the physical paper) and click Continue.
- Keep clicking Continue through the follow-up screens until you see a screen titled: "Let's check for uncommon situations."
- Check the box for "Nontaxable Medicaid waiver payments" (this is the technical term for Notice 2014-7).
- TurboTax will ask for the amount of "Difficulty of Care" payments. Enter the entire amount from Box 1 of your W-2.
- Crucial Step: TurboTax will then ask if you want to include this as "Earned Income" for the Earned Income Credit (EIC).
- Yes: If you want to use the income to potentially get a bigger refund via tax credits.
- No: If you just want the income removed from your taxable total.TurboTax will automatically generate Form 1040-X.
In the "Explain why you are amending" section, type something clear and simple:"Excluding income under IRS Notice 2014-7. I am a live-in care provider for my sibling, and these Medicaid waiver payments are excludable as difficulty of care payments."
State Taxes: TurboTax will automatically prompt you to amend your California return (Schedule X) as well. California follows federal law here, so your state taxable income should drop as well. To activate the amendment process and allow the data to transfer from your federal return, open your state tax return and continue through the return so that your Ca stte return is amended as well.
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
