If my ihss income is excludable does this mean i cant use it towards earned income credit

That is correct, it does not count as Earned Income for purposes of the Earned Income Credit.

https://ttlc.intuit.com/questions/2635384-qualified-medicaid-waiver-payments-on-a-w-2-show-as-earned...

Hi @TaxGuyBill , thank you for your help! So, If the IHSS money does not count towards FIT, does that mean that I would no longer receive the Child Tax refund? For 2 children, I receive a 6k refund. Could I opt out of signing the 'Live-in self-certification form for IRS federal tax wage exclusion' and still receive a refund? Thank you!

If that is your only income, that is correct.  You would not qualify for the Earned Income Credit or the Additional Child Tax Credit.  Sorry.


From the IRS:

"Q9. I received payments described in Notice 2014-7 on or after January 3, 2014, that are excludable from gross income as difficulty of care payments under § 131. May I choose to include those payments in my gross income for 2014 and later years?

A9. No. A taxpayer may not choose to include in gross income difficulty of care payments that are excludable from gross income under § 131 as provided in Notice 2014-7"
<a rel="nofollow" target="_blank" href="https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income">https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income</a>

So if you file your taxes as normal and receive a refund then what?

Am in same situation. What should I do 😐 

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I did it through efiling. It automatically gave me the EITC. IHSS is my only income. So should I put amended form? 

No. The EIC is now allowed. See AmeliesUncle's reply.

Edited 1-20-20 1:17PM

thanks

@Hal_Al  The original answer is outdated ...

There was a recent Tax Court case that ruled that it DOES qualify for the Earned Income Credit.  Although I may have missed it, so far I have not seen the IRS respond to that court case.

https://www.ustaxcourt.gov/UstcInOp/OpinionViewer.aspx?ID=11863

EDIT:  The Instructions to Form 1040 now state that you report it as taxable income on Line 1, then 'back it out'  on Line 8.  That way, that income will qualify for the Earned Income Credit.  As for whether TurboTax is set up for that, I have no idea.

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, enter 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.

Does this also apply to parent providers who have chosen the tax exempt option?

Yes, parent providers are now tax exempt and have no choice but to be exempt may not claim the EIC any longer. However, if you Or your spouse have another job outside if this, you may claim the EIC as usual. 

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@bellagirl33 wrote:

Yes, parent providers are now tax exempt and have no choice but to be exempt may not claim the EIC any longer.

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No, the Instructions above make it clear that you may "choose" to include it in your income for purposes of the Earned Income Credit.

Call the IRS:  [phone number removed]  hours 7 AM - 7 PM local ti... so how donwe enter our info into the turbo tax app , sorry im trying to understand exactly how to do it . I onky have one amount in my w2 and its in box 1?

See this link:

Qualified Medicaid waiver payments on a W-2 show as earned income for EIC

@Denzillee1813

No, you CANNOT claim tax exempt income. How can you claim income that’s exempt? If you signed the form that states you’re client lives with you, then you are infact exempt! Now, if you wanted to not be exempt, perhaps you can call IHSS and cancel the paperwork you signed. Ihss will not send you a W-2 if your a parent provider which means you cannot claim

that income for the EIC purposes. 

@bellagirl33   Apparently it is changed that now you can get EIC for it.  Read this whole thread.  You enter it on line 1 wages then back it out on a later line.  Then it should give you EIC.

So where do you input the income? In the Job W2 section or the miscellaneous other income section? I am an IHSS care giver who lives with the person I take care of. There was another question from 2019 where is said to enter the income in the miscellaneous other types of income is that still current information ? 

To enter wage income for which you did not receive a W2 or 1099 to include for EIC on line 1.  Follow these steps to enter. 

1.  Click Federal in left hand menu

2.  Click Income & Expenses at the top of the page

3.  Scroll down to "Less Common Income"

4.  Click Show More

5.  Miscellaneous Income (Start/Revisit)

6.  Income not reported on W2 or1099 (Start/Revisit)

Then to back out the non-taxable part:

1.  Miscellaneous Income (Revisit)

2.  Other Reportable income (Start/Revisit)

3.  As Ameliesuncle shows above "...enter it in parentheses and enter “Notice 2014-7” and the nontaxable amount on the dotted line next to line 8." 

If I didnt file 2018 taxes because of this can I file it now?

Ivee already filed 2019

@cclement337  

Yes. But you can not do it with with TurboTax (TT) online software.  TT, online, can only do current year returns.

You can still prepare 2017-2018 returns with TT download software.  You cannot e-file, but must print and mail. https://turbotax.intuit.com/personal-taxes/past-years-products/

You can also get forms (for mailing) from the IRS. https://www.irs.gov/forms-pubs/prior-year