Including Medicaid waiver income for EIC

[Ihss]

How do I include my exempt Medicaid waiver income as earned income for the EIC for my 2022 taxes?

There’s a spot in misc income to enter this income.  The earned income credit questions ask if I want to include this income for the credit. I select yes, and then it tells me I don’t qualify for the EIC because I have no earned income.  So it’s not including the exempt income. Is this a software error, or am I missing something?

[ShirlynW]

BarbaraW22  suggest to include your Medicare wavier income please follow the steps below:

1. Log into TurboTax.
2. Click on Federal from the menu on the left-hand side.
3. Click on "Wages & Income" at the top.
4. Click Edit/Add next to "Job (W-2)."
5. Click "Add a W-2."
6. If you received a W-2 for your Medicaid Waiver Payments, enter the information as reported on your W-2. 
7. Enter the amount you received for Medicaid Waiver Payments in Box 1 (even if this amount is not reported in box 1 of your W-2.) 
8. If you did not receive a W-2, go to "Wages and Income" section.
9. Scroll down to "Less Common Income."
10. Click on "Show More."
11. Click on Start/Revisit next to "Miscellaneous Income" 
12. Click on Start next to "Other Reportable Income."
13. Select "Yes."
14. In the "Description", enter "IRS Notice 2014-7 excludable income."
15. In the "Amount", enter the W-2 box 1 amount (or amount of Medicaid Waiver Payments) as a negative (-) number

[Ihss]

This doesn’t work. It did last year, but not for 2022.  There is a new (I think) place added specifically for entering this exempt income.

Under income:

Less common income

Miscellaneous income

Other income not already reported on a Form W-2 or Form 1099

Nontaxable Medicaid waiver payments not reported on Form W-2 or 1099 - entered the amount.

Then for the EIC:

First screen says: From what you've told us, it looks like you can get the Earned Income Tax Credit (EITC). We just need to check some things to make sure.

Next screen yes

Next screen none of these apply

Next screen

1. • Your earned income for this credit: $0
   • Number of dependents: x
   • Medicaid waiver payment: $xxxxx (already included)

Do you want to add your Medicaid waiver payments to your income for this credit?

Select yes

Next screen:

It turns out you don't qualify for this credit

That's OK. We'll keep looking for other tax breaks for you.

Why don't I qualify for the Earned Income Credit?

Because you don't have any earned income, you don't qualify for the Earned Income Credit.

But if it’s including my IHSS income as earned income like I told it to, then I should have the income to qualify for the credit.  Unless I’m missing something??

[ShirlynW]

Please follow the steps below to enter your Medicaid waiver payments.

1. Log into TurboTax.
2. Click on Federal from the menu on the left-hand side.
3. Click on "Wages & Income" at the top.
4. Click Edit/Add next to "Job (W-2)."
5. Click "Add a W-2."
6. If you received a W-2 for your Medicaid Waiver Payments, enter the information as reported on your W-2.
7. Enter the amount you received for Medicaid Waiver Payments in Box 1 (even if this amount is not reported in box 1 of your W-2.)
8. If you did not receive a W-2, go to "Wages and Income" section.
9. Scroll down to "Less Common Income."
10. Click on "Show More."
11. Click on Start/Revisit next to "Miscellaneous Income"
12. Click on Start next to "Other Reportable Income."
13. Select "Yes."
14. In the "Description", enter "IRS Notice 2014-7 excludable income."
15. In the "Amount", enter the W-2 box 1 amount (or amount of Medicaid Waiver Payments) as a negative (-) number

[Ihss]

I did not get a W2. So according to your instructions, I only enter the Medicaid waiver payments as a negative number?  

(I actually first created a W2 to enter the income and zeroed it out this way, but then it said I had zero earned income for the EIC)
If you are an employee of TurboTax, can you please check the way I detailed I was entering it and tell me why that doesn’t work?

[DaveF1006]

Here is a complete set of instructions on how to enter the income and then delete it as a negative number. 

1. Click Federal Taxes -> Wages & Income 
2. Scroll down to Less Common Income Go to the last selection, Miscellaneous Income and click Start 
3. Go to the last option, Other reportable income and click Start 
4. When it asks, "Any other reportable income?" say yes and then type  2014-7 income and then the income amount.
5. On the line below that, type in  2014-7 income excluded under IRS provision and the full amount of this amount with a minus sign negating the income.

Now it is properly recorded and then excluded.  This type of income does not qualify as earned income but it is eligible for the Earned Income Credit.

@Ihss 

{Edited 02/03/23| 2:10 PM PST} @Ihss

[jones111]

Hello DaveF1006, 

I received a 1099-NEC. Do I enter the 1099-NEC and then continue with the steps for reporting as Other Reportable Income? 

Thank you kindly

[Vanessa A]

You are posting to an old thread. That answer was for last year.  TurboTax has made it easier this year.  After you enter your 1099-NEC, you will click continue and then on the screen that says "Does one of these uncommon situations apply" You will select "This income is a Medicaid waiver payment that qualifies as a difficulty of care payment"