Non taxable income being taxed

[Roseannaa1]

I am submitting a W2 for non taxable income with IHSS because I live with my grandmother it is non taxable so box 1 shows zero and I just show the non taxable amount in box 12 . However after submitting this on intuit turbo tax it lowers my refund by over 1,200 dollars . I have reviewed taken it and re entered to make sure I did not make a mistake but it always drops my refund by 1200 dollars ? Again yes it is non taxable soc 2298 income the W2 was issued correctly by the state but on turbo tax it is lowering my federal amount ? What can I do to fix this ?

[ThomasM125]

The additional is probably the social security tax on the IHSS income. It is not subject to income tax but may be taxable for social security tax. Can you clarify what the code number is in box 12?

[Roseannaa1]

Box 12 list code II . 

[ThomasM125]

Per this excerpt from an article from the IRS, the payments could be subject to social security tax if you work for an agency:

If social security/Medicare tax was not reported in box 4 or 6 on your W-2 form, then the taxes may be paid when you file your tax return. To verify this, you should look on line 23 of your Form 1040 to see if there are additional taxes listed there, also in Part II of Schedule 2. To view your Form 1040 and Schedule 2 follow these instructions:

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. Choose View Tax Summary
4. See the Preview my 1040 option in the left menu bar and click on it
5. Choose the Back option in the left menu bar when you are done 

{Edited 1/29/25 at 1:22 PM PST]

@Roseannaa1

[Roseannaa1]

Both Medicare and social security taxes were taken out and reported on the w2 and the amounts were entered into the correct boxes .

[Roseannaa1]

Ok so I did this and it did add it ass income in 1d  and it says medicaid waiver payments NOT reported on form(s) W2?

it also add it on additional income from schedule 1 . So I think this is a software issue ? 

[KrisD15]

Did you select "Nontaxable Medicaid waiver payments that qualify as difficulty of care payments" 

On the 

"Let's check for uncommon situations"   screen when you entered the W-2? 

[Roseannaa1]

Yes.

[Roseannaa1]

Sorry I said yes went back and checked and it doesn’t give me that option on this specific W2 it does give me the option to pick it on my other entered W2 which is really weird .

[ThomasM125]

OK, I'll have someone look at it. Can you do the following for me to give us a diagnostic copy of your return. All of your personal information will be blacked out for security reasons:

While working on your return:

1. Choose Tax Tools from your left menu bar in TurboTax Online
2. Choose Tools
3. From the Tools Center, choose Share my file with agent

You will get a code to post in the forum that only we can read, then we can look at your return to troubleshoot and I'll post a solution as soon as we can:

[Roseannaa1]

Token number 1264188

[ThomasM125]

Thank you! Check back for updates.

[ThomasM125]

Since the income is not reported on your W-2 form in box 1, you don't need to enter the W-2 form in TurboTax. You can add the income however if you need it for earned income or other purposes as follows:

1. From the Federal menu in TurboTax find Wages and Income 

2. Find Less Common Income

3. Choose Miscellaneous Income, 1099-A, 1099-C

4. Choose Other Income not already reported on a W-2 form

5. Say "yes" to the question regarding receiving non-taxable Medicaid waiver payments:

6. Work through the section and enter your non-taxable health care payments and they will show as non-taxable on your tax return:

[Roseannaa1]

My tax preparer did not enter it the previous year and the IRS sent me a letter and 4k bill.

I will see what happens if I added the way you suggest however I think it may still change the amounts in the return . Will see what happens .Thank you.