Can I still Claim my 2 children on my 2017 W2 for earn income credit ? I mailed 2 SOC Form 2298 Self Certification form for Federal Tax wage Exclusion . Is this good

[1oussycat]

The reason WY I asking this because  .
I work for 2 of my children with Inhome Supportive Service  .

IHSS mailed to me 2 forms to have my Fedreal Tax Wage Exclusion  .

Can I still Claim 2 of my Children for Earn Income Credit on my 2017 W2 Tax Return  ?  

Happy Holidays

[Hal_Al · Accepted solution]

No, if that is your only earned income.  It's a case of "you can't have you cake and eat it too".

You can't exclude the income from federal tax and at the same time count it as earned income for the federal refundable credits. The money you hear about people getting for just filing a tax return claiming kids requires you to  have some earned income (wages or self employment). Without other earned income, you are not eligible for the "refundable" Earned Income Credit or Additional Child Tax Credit.

UPDATED  The original answer is outdated:

There was a recent Tax Court case that ruled that it DOES qualify for the Earned Income Credit. 

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 (line 8z of Schedule 1 on more recent forms).  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.

[Hal_Al · Accepted solution]

There was a recent Tax Court case that ruled that it DOES qualify for the Earned Income Credit. 

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 (line 8z of Schedule 1 on more recent forms).  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.

[Critter]

We had a long discussion on this subject before in this forum  ... bottom line conclusion  is if you are eligible to exclude the income you must ... there is no choice in the matter.

[Hal_Al]

Critter#2 is correct. See question #9 at <a rel="nofollow" target="_blank" href="https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income">http...>
The above answer has been revised.

[bellagirl33]

But what if you didn’t know and you filed as normal for years and received the EIC not knowing it’s non taxable income allnthis time. Then what happens? Would you have to pay back years of the EIC? I need to know ASAP so I can let my relative know whom lives with her child and receives Ihss. Thanks!

[Critter]

It is my opinion that they should file correctly going forward and let the prior years alone ( let sleeping dogs lie).

[bellagirl33]

Thanks for the reply! I agree..