2014-7 Difficulty of care act

[prezidentelect]

Followed the instructions on entering the w-2's for the 2014-7 act. Does this also adjust this for me in the state part or do I have to exclude that income from taxes there also or does turbotax do that for me?

[DawnC]

Only some states exempt that type of income.  Which state are you filing?   And how did you exclude the income from your federal return?  

Qualified Medicaid waiver payments

[hjones1]

I also need that answer.  I am currently on phone with a client and we are trying to find where to enter that information.  

[CatinaT1 · Accepted solution]

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. 

If these payments are paid to you in box 1 of form W-2 (they should not), first try to get a corrected Form W-2 from the payer. If you cannot get a corrected Form W-2, follow these steps: Do not enter the W-2 in the Wages & Salaries topic. Instead enter it as Other Reportable Income under the Miscellaneous Income section. Take the following steps: 

1. Sign in to 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);

1. Click on Federal Taxes at the top of the screen;
2. At the bottom of Your Income box pick the option in blue to help me add other income, then jump to full list;
3. Scroll down the page to the last section titled: Less common Income and click show more;
4. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
5. Scroll down to the last option titled Other reportable income and select start or edit;
6. When it asks, "Any other reportable income?" say yes then you will make two entries:
7. Your first entry description would be W-2 EIN # (enter EIN number from W-2) Box 1 Medicaid Waiver Payments, and enter the Box 1 amount as a positive number.
8. Next you click "Add Another Miscellaneous Income Item," and enter this description: IRS Notice 2014-7 excludable income and enter the W-2 Box 1 amount as a Negative (-) number. 

This both shows and explains removing the W-2 income, placing a zero on Line 21 of your Form 1040. 

If your W-2 has federal or state taxes withheld, you can enter these amounts in the Deductions & Credits section under Other Income Taxes as Withholding not already entered on W-2.

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

[ccsail13]

States don't have an option to either follow a federal IRS Guidance or not.  IT is the law.   The state is wrong. 

[DMarkM1]

The state interviews start with Federal Adjusted Gross Income so if the payments are excluded from there they will not be included in the state income.  

[Ahorsesoul]

My husband and myself both have two W-2s from two different Fiscal Agents. Our Fiscal Agent changed in the middle of 2019.

One W-2s has no tax listing in box #2 and #17.

But the other W-2s have tax list in both places.

How do I enter the tax that was taken out.

It was due to the Fiscal Agent not listing the Exempt Status for 204-7 when we changed companies.

We have been Exempt for years. So nothing else changed.

[DMarkM1]

Enter all the forms W2 exactly per the paper forms you have in the "Income & Expenses" tab under the "Job W2" topic.  Then scroll down to "Less Common Income".

1. Click show more;
2. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
3. Scroll down to the last option titled Other reportable income and select start or edit;
4. When it asks, "Any other reportable income?" say yes 
5. "Enter this description: IRS Notice 2014-7 excludable income and enter the W-2 Box 1 amount as a Negative (-) number.

Add each of the 4 W2 box 1 amounts as a separate item.  This will exclude the income with explanation for each of them. The amount withheld will then be an overpayment to be refunded.   

[mzhill1970]

So is the income only supposed to be reported in that section.

The income shows up as both 1099 misc, and Miscellaneous Income, 1099-A, 1099-C with a negative number next to it. 

I did not receive a W2, I receive a 1099-Misc(its the same every year)  and because of COVID my regular person is unable to do my taxes even though they messed it up last year with the same thing.

[ME1980]

How do I enter income for North Carolina taxes, if the income(2014-7) is not exempt from state income taxes? 

[Lou Gutierrez]

Arizona

[Cynthiad66]

Here is the 2014-7 from IRS Link  2014-7

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, described in this notice, are difficulty of care payments excludable under § 131 of the Internal Revenue Code.

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. 

I checked with the Arizona Department of Revenue and found no reference to the 2014-7 Act.  Does not appear to be excludable in your state.  If you found otherwise, please use the instructions above to exclude your income in AZ.

[Lou Gutierrez]

Arizona did remove state taxes on the income but Federal withholding is zero. some Care Agencies says that it's federally excluded, but some don't. 

[Ldotson88]

With the ruling that was in favor of those who qualify for difficulty of care payments being able to have a zero agi and no fed tax but also being able to claim income for purposes if the earned income credit where are instructions how to go abour this and how to amend previpus years taxes for this. I need to know, I had a w2 for 2020 because i did not know i qualified so taxes were taken out. My tax person i used this year is clueless how to go about this....and did my taxes completely wrong 😠 2014-7 seems to be the old code which was im assuming changed because there was a court ruling on this issue I think it was 2019? But hard to find any I formation in regards to clarifying exactly how filing works, i found one example but lost the link. Havent found it since. 

[Cynthiad66]

That IRS Notice is still in effect.  It is true that the Tax Cuts and Jobs Act made a number of changes, but this provision was not changed.  If the payments in question are for someone you are caring for in your home, then they are excluded from income (not the case if the individual does not live in your home).

The following FAQ goes into more detail on the subject:  https://ttlc.intuit.com/replies/4360071

Per @DanielV01