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queentsfc
New Member

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

I live in California and receive IHSS payments to take care of my live-in disabled son (Adult). I am aware that they have changed the tax law on exempt income for IHSS live-in providers.

 

"The Tax Court in Feigh, (2019) 152 TC No. 15 has ruled that Medicaid Waiver payments, even though excluded from income, are still earned income for purposes of claiming refundable tax credits like the additional child tax credit and the earned income tax credit"

 

What can quite figure out how to claim exemption and still get EIC using the turbo tax system. earlier post does not explain it with the new rule and new program layout. 

A walk thought would be nice. and helpful

28 Replies
ColeenD3
Expert Alumni

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

Yes. You would enter the income and then back it out.

 

Certain Medicaid waiver payments you received for caring for someone living in your home with you may be nontaxable. If these payments were reported to you in box 1 of Form(s) W-2, include the amount on Form 1040 or 1040-SR, line 1. Also, include on line 1 any Medicaid waiver payments you received that you choose to include in earned income for purposes of claiming a credit or other tax benefit, even if you did not receive a Form W-2 reporting these payments. On line 8, subtract the nontaxable amount of the payments from any income on line 8 and enter the result. 

 

Steps

 

Do not enter the W-2 in the Wages & Salaries topic. Instead enter it as Other Reportable Income under the Miscellaneous Income section. Take the following steps: 

  1. 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);
  2. Click on Federal Taxes at the top of the screen;
  3. At the bottom of Your Income box pick the option in blue to help me add other income, then jump to full list;
  4. Scroll down the page to the last section titled: Less common Income and click show more;
  5. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
  6. Scroll down to the last option titled Other reportable income and select start or edit;
  7. When it asks, "Any other reportable income?" say yes then you will make two entries:
  8. Your first entry description would be W-2 EIN # (enter EIN number from W-2) Box 1 Medicaid Waiver Payments, and enter the Box 1 amount as a positive number.
  9. Next you click "Add Another Miscellaneous Income Item," and enter this description: IRS Notice 2014-7 excludable income and enter the W-2 Box 1 amount as a Negative (-) number. 

This both shows and explains removing the W-2 income, placing a zero on Line 21 of your Form 1040. 

If your W-2 has federal or state taxes withheld, you can enter these amounts in the Deductions & Credits section under Other Income Taxes as Withholding not already entered on W-2.

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

allimacsnwod
Level 3

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

I have followed these instructions and everything worked.

However, I will not be getting a W-2, and the company says I will not get a 1099, so I do not have a tax id number for them. When attempting to e-file, Turbo Tax returns a message that a tax id number is needed. Is there a way around this, or do I need to do something different?

 

Thank you!

KrisD15
Expert Alumni

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

Which state?

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allimacsnwod
Level 3

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

Thank you so much for responding!

 

I'm in Nevada.

 

Additional information:

 

I will not be getting a W-2, nor a 1099. 

 

All information was entered seamlessly until trying to e-file. System is telling me I need to insert a tax id number which I don't have for the agency that is paying me.

I am a Supported Living Provider for my disabled daughter. She lives with me. I am paid with medicaid waiver funds. However they are administered through an agency. This agency considers me an independent contractor. Thank you for any assistance provided!

KrisD15
Expert Alumni

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

-Does this agency have an EIN, I would think they must. 

I would ask them for their number. 

 

You could also use 99-9999999 if that gets you through the program. 

 

Be sure to keep a statement or copies of your payments with your tax file. 

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allimacsnwod
Level 3

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

They are incredibly difficult to get information from. Every time I've mentioned taxes, they say I am an independent contract and they will not be sending me anything. And, I am an independent contractor. I don't disagree. 

 

Will it get flagged (or whatever) with putting all 9's into the system? 

 

Thank you so very much. I'm desperate to get this filed and I want to make sure I'm doing it correctly.

npierson7
Level 1

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

If you didn't receive any tax forms for that income and it isn't taxable income under the IRS Notice 2014-7 exclusion, the easiest way is not to include that income to your tax return. Keep all your documents related to the payments and it won't be a problem. 

allimacsnwod
Level 3

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

Thank you for your response. I am aware I can just exclude the income. However, I would like the tax credits, per this: 

 

"The Tax Court in Feigh, (2019) 152 TC No. 15 has ruled that Medicaid Waiver payments, even though excluded from income, are still earned income for purposes of claiming refundable tax credits like the additional child tax credit and the earned income tax credit"

DawnC
Expert Alumni

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

Even if the agency considers you an independent contractor, they should issue you a 1099 or at the very least be willing to give your their EIN number so you can report your income.   You can certainly attempt to e-file with 99-9999999, but you may get an e-filing error.  But it may go through.   And no, if it goes through, it is not going to cause an issue with the IRS, because they have nothing reported to them for the income.   You are reporting it according to their instructions after all.   Do they issue you anything when they make the payments that might have their tax ID number on it?  

 

See this discussion, where Barbara outlines the steps needed to report the IHSS income for the purposes of claiming the EIC and CTC as well as negating the entry to report the income as non-taxable.   I think this is what you have done, but there are links in her answer that reference that you are reporting it correctly.    I think the issue now is getting the return e-filed so you are not relegated to filing by mail.    @allimacsnwod   

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allimacsnwod
Level 3

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

Thank you, Dawn.

 

The information you link to from Barbara is what I used, so thank you for seconding what she had advised. 

 

I will email tomorrow and see if I can get anywhere with getting the tax id number. The remittance they give me for the monthly payment only has the agency name. No other information besides a break down of the funds. It's direct deposited, and they email the remittence slip.

 

Thanks again so much. I am feeling much better about filing it now. 🙂 

Shellie922701
Level 2

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

mY W2 HAS 0.00 FOR WAGES IN BOX 1 Would I still enter information under other taxable income?  I would still have to enter something because I do have social security wages and medicare wages to enter correct?

Critter-3
Level 15

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

If the W-2 has zero in box 1 you do not enter it in the system ... if you do the program will give you an error  and keep you from efiling. 

Shellie922701
Level 2

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

How do I enter my social security earnings and medicare?  And how do I let the IRS know that my income is exempt?

Critter-3
Level 15

How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

The W-2 was sent to the SS administration and then forwarded to the IRS so nothing needs to be entered on the actual tax return ... so if the W-2 has nothing in box 1 do NOT enter it into the  program. 

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