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

[naomijohnson78]

I recieve in home support services for 3 disabled children. Recently in march federal regulations said this income is excludable. Im wondering if i can no longer count that income towards earned income credit

[TaxGuyBill]

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...

[kathleeneastland]

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!

[TaxGuyBill]

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">http...>

[bellagirl33]

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

[glenthediamond]

Am in same situation. What should I do 😐 

[Hal_Al]

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[glenthediamond]

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

[Hal_Al]

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

Edited 1-20-20 1:17PM

[glenthediamond]

thanks

[AmeliesUncle · Accepted solution]

@Hal_Al  The original answer is outdated ...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.

[Killrpickle]

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

[bellagirl33]

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. 

[AmeliesUncle]

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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.

[Denzillee1813]

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?