How to exclude IHSS earnings and still claim EIC on TurboTax system in 2021 for the 2020 tax year?

[VolvoGirl]

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?  

[Shellie922701]

Thank you for taking the time to help me.  I appreciate it 🙂

[Shellie922701]

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.

[macuser_22]

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@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.

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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.

[VolvoGirl]

@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?

[macuser_22]

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@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?

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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.

[VolvoGirl]

Starting in 2019 you can choose to use IHSS income to qualify for EIC.  See 1040 instructions page 43 step 5 line 5

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

[VolvoGirl]

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.)"

https://ttlc.intuit.com/community/taxes/discussion/re-how-do-i-file-the-taxes-if-i-m-an-ihss-provide...

Good 2/3/2020 employee answer about IHSS income and EIC.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/regarding-medicaid-waiver-paymen...

[VolvoGirl]

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.

[Yatziryp91]

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?

[kgryting]

I assume this approach can work in 2022 for 2021 taxes?

I've done it as a draft using TT CD and it vastly improved my results.  BUT, I went back to 2020 (using 2020 TT cd) and my tax liability was MORE using it this way.  My 2020 was actually filed by entering W-2 income as "normal" W-2 wages and entering a negative value as Other Income using the 2014-7 notice.  When I considered doing an amendment and using THIS approach (W-2 income as "other" income and then also negative value as Other income), then Turbo Tax showed I would have to pay back some of my refund.

Strange.  I'll leave 2020 alone - I was happy with it.  Hoping I can use this method for 2021 because it does help me qualify for EIC.

[macuser_22]

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@Yatziryp91 wrote:

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?

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For Earned Income Credit it must be taxable earned income.   A 0 in box 1 means that it is not taxable.   You don't get both tax free income and EIC.

[Beattitude]

I do not have a W2. I want to enter IHHS non taxable income as income for child tax credit.

MEDICAID WAIVER PAYMENT: FEIGH 152 TC NO15. Where do I enter it on my tax form? Thanks

[Critter-3]

For tax year 2021 you don't need ANY earned income to get the full CTC. 

[Jess106]

Hi, if I want this income to count towards earned income, do I still.need to back it out? Or just add it in as described?