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
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:
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.
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!
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!
-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.
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.
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.
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"
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
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. 🙂
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?
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.
How do I enter my social security earnings and medicare? And how do I let the IRS know that my income is exempt?
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.
Why did you get a W2 with 0 in box 1? Anything in box 16? What state? Is it for IHSS Notice 2014-7 income? You might need an amount in box 1 and can get the EIC for it. Do you have any withholding in box 2 or 17? Did you get any other W2 for this work?
Thank you for taking the time to help me. I appreciate it 🙂
I got the W2 with nothing in box one because I have exempt status. I am an IHSS provider for my Aunt who lives with me in California. Yes I want to file under the 2014-7 but I have no idea how to do it. I also have $4800 that my friend paid me because I was deep cleaning his house once a month. I have no w2 or 1099 for that money but I want to claim it.
@Shellie922701 wrote:
I got the W2 with nothing in box one because I have exempt status. I am an IHSS provider for my Aunt who lives with me in California. Yes I want to file under the 2014-7 but I have no idea how to do it. I also have $4800 that my friend paid me because I was deep cleaning his house once a month. I have no w2 or 1099 for that money but I want to claim it.
You do not include a W-2 with zero in box 1 at all. In fact the IRS will reject it if you attempt to file with it. Just keep the W-2 for your records.
It sounds like you might have been a household employee for your friend if he/she supplied the tools for the cleaning, and should have issued you a W-2 and fie a Schedule H paying the employers share of the employment tax. If not then your income is self employed income and entered into TurboTax as self-employed income - a 1099 is not necessary. Since it is over $400 you will have to pay the SE (Self-employment) tax yourself witch is 15.3% of your earnings or about $734 on $4,800 income.
@macuser_22 So how do they get the EIC credit for the IHSS income then? I sure wish Turbo Tax would put out a FAQ for how to report this income properly then back it out and to get EIC on it. Could you bug them for one?
@VolvoGirl wrote:
@macuser_22 So how do they get the EIC credit for the IHSS income then? I sure wish Turbo Tax would put out a FAQ for how to report this income properly then back it out and to get EIC on it. Could you bug them for one?
AFAIK earned income for the EIC must be taxable earned income. IHSS is not taxable so it does not count for the EIC. The only exception that i know is non-taxable combat pay. See pub 596.
Starting in 2019 you can choose to use IHSS income to qualify for EIC. See 1040 instructions page 43 step 5 line 5
Couple posts I've collected
Long post with IHSS info from employees, see especially the 2/18/2021 post from Expert Dave step 4 for EIC....
"Enter the amount you received for IHSS Payments in Box 1 (even if this amount is not reported in box 1 of your W-2.)"
Good 2/3/2020 employee answer about IHSS income and EIC.
AND good IRS info. See 2019 1040 instructions page 84....
https://www.irs.gov/pub/irs-prior/i1040gi--2019.pdf
Medicaid waiver payments to care provider. 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. If the result is less than zero, en- ter it in parentheses. Enter “Notice 2014-7” and the nontaxable amount on the dotted line next to line 8. For more information about these payments, see Pub. 525.
Hey @VolvoGirl
so I will be in same dilemma as my W2 has a 0 on box 1. But I want to use it for Earned Income Credit. So would I put wages on box 1?