2014-7 income without a W2

[Tajppt39]

How do I file my Difficulty of Care income without a W2? I would like to file it for EIC credit. It is my only income, so there is no w2 involved. I have tried to follow previous advice from questions, but it is not working on the Turbotax website. I dont know if the website has changed or if I am doing something wrong. It keeps showing I owe a tax even though the income is not taxable. I tried chatting with an advisor who didnt understand how 2014-7 worked. Thanks for any help.

[KrisD15 · Accepted solution]

Yes,

Difficulty of Care income can be both tax exempt but also used for credits, such as the Earned Income Tax Credit. 

Entering into TurboTax is a bit confusing so please follow these steps carefully. 

Sign into TurboTax and continue through until you can start selecting "Wages & Income" located at the top of the screen

Click on Wages & Income

(If the program asks about your W2, select Skip for now )

Select answers to the following questions if necessary to move forward 

Click Add more income 

Scroll down to the VERY LAST option "Less Common Income" and click Show more

On this new drop-down list scroll down to the VERY LAST option "Miscellaneous Income" and click START 

On this new drop-down list scroll to the VERY FIRST option "Other income not already reported on a Form W-2 or Form 1099"

Click START

Select YES to the page titled "Other Wages Received" and Continue

Select CONTINUE on the "Wages earned as a Household Employee" screen (enter nothing here)

Select CONTINUE on the "Sick or Disability Pay" screen (enter nothing here)

Select "Yes" on the "Any Other Earned Income" screen and continue

Select "Other" on the "Enter Source of Other Earned Income" and Continue

In Description Box type "Qualified Medicaid Waiver Pay" and the amount

(NOTE- YOU MUST ENTER ALL THE INCOME OR NONE)

Click Done 

This will put the income on your 1040 line 1 where it needs to be. 

Now you need to make an entry so that TurboTax will make the income exempt from tax. 

(NOTE- AT THIS POINT, YOU MAY NOT OWE ANY TAX ON THE INCOME AND YOU MAY ALREADY HAVE THE EIC CREDIT INCLUDED IN YOUR REFUND, THEREFORE THE NEXT STEPS MAY OR MAY NOT CHANGE THE FEDERAL REFUND METER ON TOP OF THE TURBOTAX SCREEN) 

Go back to the Wages & Income section

(you will be repeating some steps, but not all)

Scroll down to the VERY LAST option "Less Common Income" and click Show more

On this new drop-down list scroll down to the VERY LAST option "Miscellaneous Income" and click REVISIT

Now scroll down to the VERY LAST option "Other reportable income" and click Start

Select YES on the "Any Other Taxable Income?" screen 

Type "Tax Exempt Income on line 1" and the same amount you entered before but as a NEGATIVE (put - in front of the number) 

This NEGATIVE number should show on your 1040 line 8 

Go through the return and answer any questions regarding the EIC if necessary.

TO CHECK IN TURBOTAX ONLINE:

Click "Tax Tools" on the LEFT SIDE BAR then click "Tools" that open below 

Click "View Tax Summary" on the screen

Click "Preview my 1040" which now appears on the LEFT SIDE BAR

Scroll though the 1040. 

The amount of income should be on line 1

The adjustment (negative) should be on line 8

If this is all you're reporting, line 11, your Adjusted Gross Income (AGI) should be 0 (zero) 

Line 27a shows the Earned Income Credit (EIC) if you are eligible

Below is a link to the EIC Income limits for 2021

 Income Limits for EIC

[Tajppt39]

Thank you so much. It worked exactly like you said it would! I just have one more question if you dont mind. Am I not supposed to enter "2014-7" somewhere on the return? Near the end where you said this below

Type "Tax Exempt Income on line 1" and the same amount you entered before but as a NEGATIVE (put - in front of the number) 

This is where I thought I was supposed to specify "Notice 2014-7 Excludable Income.  I didnt do it, but instead did it exactly like you said up above. I havent filed yet and just wanted to make sure first. I cannot thank you enough for your advice. You are the first person that has actually helped me get it to enter correctly. You so made my day 🙂

[KrisD15]

There are no clear IRS instructions on what to report it as, you simply want to type in a description that makes sense, and makes your situation clear, to the IRS. 

If you are more comfortable typing "Notice 2014-7" in for line 8, that would work fine as well. 

Line 8 would only be looked at if your return pulls up a warning and an IRS agent wants to see what you are subtracting out of income. As long as the description is clear, you should be fine.

The best advice is to do the same thing year after year. The IRS likes consistency. 

If you used 2014-7 last year, (as a description) use that again this year. 

Whatever you use this year, use the same description every year you want to claim the earned income going forward. 

I wasn't the only agent working on this. It was actually a team effort trying to get the numbers to go where we knew they should go. 

Thank you for using TurboTax. 

Notice 2014-7