IHSS Live-In Provider. Can I still claim FIT/SIT exemption and EIC without Live-In Self Certification?

[andreijona24]

As an IHSS provider/caregiver that lives with the client but have not yet filled a Live-In Self Certification Form (SOC 2298), can I still claim Federal/State Income Tax Exemptions and Earned Income Credit?

My client and I live together and it would reflect in our tax fillings as we will have the same address.

Would that be enough proof that we live together?

Also, Medical Insurance renewals and State IDs also have the same address for me and my client just in case the government or IRS wants to have a trace.

I have received my W-2 and it's written there that I've had my

Federal Income tax withheld

Social Security tax withheld

Medicare tax withheld.

Thank you.

[ColeenD3]

You need to file the certificate. You can't both exclude your wages and receive EIC. See IHSS for more information.

How Do I Exclude My Wages from FIT and SIT?

Beginning January 2017, you have the option to self-certify your living arrangements to exclude IHSS/WPCS wages from FIT and SIT by sending the Live-In Self-Certification Form (SOC 2298). All requested information on the form must be provided and the form must include your signature and the date you signed the form.

Can IHSS and WPCS providers who receive IHSS/WPCS payments choose to include those payments in earned income for purposes of the earned income credit (EIC) or the additional child tax credit (ACTC)?

Yes, for open tax years, you may choose to include all, but not part, of these payments in earned income for determining the EIC or the ACTC. For more information about EIC and the ACTC, please visit this IRS website. Providers are encouraged to consult with a tax advisor or contact the IRS directly with questions.

[andreijona24]

If I get to file the SOC 2298, could I then claim for both exclusion of the income and eic?

I read here it's a new case (Feighs vs Comm 2019) but I'd appreciate some people double checking the matter.

It's also quite a bit confusing for me. I can't seem to fully understand the conclusion.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-to-exclude-ihss-earnings-and...

https://www.irs.gov/pub/irs-aod/aod-2020-02.pdf

https://www.civicresearchinstitute.com/online/PDF/%20JTI-3701-06-Feigh.pdf

Judge Goeke discussed the difference between the meanings of
“included” and “includible” at some length:

This Court has previously opined on the meaning of “includible” versus “included,” and we have held that these words are not functionally
the same.24 While “included” refers to the actual treatment of income,
“includible” refers to a required treatment of income, whether or not the
income was actually so treated.25 Thus, an item of income is “includible”
in gross income if it is required to be included as income irrespective of
whether the item was actually included in the taxpayer’s gross income.
Because [the Feighs’] Medicaid waiver payment is “includible” in their
gross income but for Notice 2014-7, . . . the question for us becomes
whether a notice can effectively usurp Congress’ authority in granting
tax credits by denying petitioners a credit they would have been entitled
to in the absence of this notice.”26

The answer was No. The notice had concluded that the “treatment of
qualifi ed Medicaid waiver payments as ‘diffi culty of care payments’ is consistent with the defi nition under [Section] 131(c).”27 However, wrote Judge
Goeke, “these payments clearly do not meet the plain statutory defi nition
found in the Code.”28 The payments therefore were held to be includible in
gross income in 2015, and they therefore did constitute earned income for
that year within the meaning of Section 32(c)(2)(A).

[CatinaT1]

TurboTax can exempt income under Notice 2014-7 per the IRS instructions. This Notice provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program, are difficulty of care payments and excludable as income.  

  

Since you received a W-2, you should enter the information in TurboTax and then show an offset for this entry so that you will not be taxed on the payments. This will reconcile your tax return with what the IRS has received and then show the corresponding offset to explain why it is not taxable. You will also be able to recover the federal and state taxes that were withheld from your payments. Please see the steps listed below to enter your W-2 into TurboTax. 

  

It is also important to inform you that a recent court case, ruled that IHSS payments and Medicaid Waiver Payments are considered "earned income" for purposes of calculating the earned income tax credit and other credits. Even though the income is not taxable for income tax purposes, a taxpayer can choose to show the payments as earned income to claim a credit. 

  

The instructions below include steps to enter the payments as earned income to receive a credit or to report them as unearned income. Either way the payments will not be subject to federal or state income taxes. 

  

1. Sign into TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer); 

2. Click on Federal from the menu on the left-hand side and then click on Wages & Income at the top; 

   1. If you choose to report your payments to receive a credit:  

      1. Click Edit/Add next to Job (W-2);  

      2. click on Add a W-2; 

      3. enter the information as reported on your W-2. 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). 

   2. If you choose not to report it as earned income to receive a credit:  

      1. Scroll down to "Less Common Income";  

      2. click on Show More; 

      3. click on Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C; 

      4. click on Start or Revisit next to Other reportable income; 

      5. select Yes 

      6. enter "In-Home Support Services Payments, EIN # (enter EIN number from W-2)" in the description box and then enter the amount from box 1 your W-2; 

      7. click Continue.  

3. To enter the offset for the payments (whether you chose to report as earned income or not):  

   1. Click on Wages and Income at the top of the screen; 

   2. scroll down to "Less Common Income"; 

   3. click on Show More; 

   4. click on Start or Revisit next to Miscellaneous Income; 

   5. click on Start or Revisit next to Other Reportable Income; 

   6. select "Yes" or "Add Another Income Item"; 

   7. in the "Description" section, enter "IRS Notice 2014-7 excludable income" and in the "Amount" section, enter the W-2 box 1 amount (or amount of IHSS Payments) as a negative (-) number. 

  

For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs. 

[AmeliesUncle]

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@andreijona24 wrote:

If I get to file the SOC 2298, could I then claim for both exclusion of the income and eic?

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It does not matter if you file that form or not.  That is not a form for IRS purposes.  That is merely a form to tell your employer how to withhold taxes and/or create your W-2.

As long as you qualify for it (living with the person and being paid under a Medicaid Waiver program), you can exclude the payments from your income.

Yes, for purposes of the Earned Income Credit, you have the option to include or exclude that income (and either option will not change the fact it is not subject to income tax.

[KatelynT]

If I include income from IHSS as a live in provider will my AGI go up?

[AmeliesUncle]

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@KatelynT wrote:

If I include income from IHSS as a live in provider will my AGI go up?

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If is qualifies to be excluded from taxes, it is NOT an option to intentionally include it in your income.  So no, it your AGI would not go up.

Including it for purposes of calculating EIC is completely different than including it in your income.