On your 2021 return, you can enter the waiver as a negative "Other Income" amount and it will be subtracted from your wages reported on your W-2 form:
1. From the Personal Income screen in TurboTax, choose Less Common Income
2. Choose Miscellaneous Income, 1099-A, 1099-C
3. Choose Other reportable income
4. On the screen that says Other Taxable Income enter a description (Medicare waiver) and the amount as a negative number
Yes.
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. You can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.
You will then get to choose if you want to include the income for Earned Income Credit or not.
For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs.
Got it. What should I put on the next screen? The amount in Box 3 or 5? or just 0?
When I put the amount in the box 3 in the box below it increases my return but I have a feeling that since box 1 is 0 I shouldn't put any amount in the box below.
I checked the "nontaxable Medicaid waiver..." option for our W2's with 0 in box 1, and put nothing in the box asking "Enter the total amount of difficulty of care payments you received from ...",
but still get this error
You will want to enter an amount here, likely the amount from box 3.
Make sure you have your W2 entered just like it is, all boxes. Then here, you will enter the amount (box 3) that was Medicaid waiver payments. If you enter 0 here or don't put an amount, you are not able to efile.
Hi again @CatinaT1, still can't file even with entering the amount from box 3/5 in there, I'm still getting the 0 in box 1 error. Any thoughts?
Hi, After following the steps you suggested and selected: Nontaxable medicare waver...
I did not see what you said: "You will then get to choose if you want to include the income for Earned Income Credit or not. "
Could you please clarify? Thank you!
I see you have several questions on this.
The ability to choose if you want to include the income for Earned Income Credit is found later in the Deductions & Credits section under Earned Income Credit.
Even if you didn't file with this W2, Social Security and Medicare Wages and withholdings would still be reported.
If you have other questions, please include them all in a single post.
Hi - I did everything that was suggested in this thread but still get the error that I cannot efile. Any suggestions?
Thanks
It worked for me after putting $1 in box 1. You will be asked "How much of the 1.00 in box 1 is difficulty of care payments?" with three choices: All of it, None of it, and Some of it. I selected None of it. I then entered the amount in W2 box of 3 and 5 into the box asking for the total amount of difficulty of care payments I received. By doing so, the unable to e-file error is gone, allowing me to continue with e-file process. Hope this helps.
So you were able to efile successfully? I was under the impression that the steps suggested by checking the box that says "Nontaxable medicare waiver payments.....you would be able to efile.
I originally posted this question and never got around the issue, and filed by mail. Called customer service a few times and was constantly told that there's no way around it. I did read about putting $1 for box 1 in some forum posts to just get around it and file online, but it's not TurboTax's official suggestion and I didn't feel comfortable doing that, just in case if I'm audited.
I am currently stuck at paying state efile with a different issue. I believe the $1 in box 1 resolved the subject problem. I also tried your way, but that didn't let me efile, either.
The suggestion didn't solve the problem in my case (only one W-2). It looks like a bug.
@valleynomad You do not say when or even if you tried to e-file, but the e-filing deadline was at midnight on October 16. It is no longer possible to e-file an original 2022 return. Unless you tried to file on the deadline day and your return was rejected, the only way you can file now is by mail. It is not a "bug." E-filing closed for "first-time" attempts at midnight. If your e-file was rejected on 10-16, you have five days to fix it and try to re-file.
When you mail a tax return, you need to attach any documents showing tax withheld, such as your W-2’s or any 1099’s. Use a mailing service that will track it, such as UPS or certified mail so you will know the IRS/state received the return.
Federal and state returns must be in separate envelopes and they are mailed to different addresses. Read the mailing instructions that print with your tax return carefully so you mail them to the right addresses.
@xmasbaby0 Thanks for the reply. But the TT error message I got refers specifically to W2 box 1 being 0. It has nothing to do with e-filing deadline. And, in case you haven't heard, the filing deadline for Californians is now Nov 15th.
Well, I see that the CA tax return deadline is November...but I ahven't seen that the Fed/IRS deadline was changed....thus you likely still had to e-file Fed part by the 16th of October.
Whups...You're right....Even the IRS changed the deadline at the last minute...but only for those CA residents in affected disaster areas.
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It remains to be seen as to whether TTX will do....whether TTX will allow those to e-file their remaining unfiled Fed & CA taxes that late or Not...usually they shut down everything...entirely by the end of October. And if they (TTX) do allow some new e-files for CA residents, it would likely take another day or three for their system to be updated.
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You should print out your tax files in the next few days so you are ready to mail them in...just in case.
It has still not been clarified whether users in CA will have any luck with e-filing beyond the 10-16 deadline. We know the CA deadline was extended but TT has not said whether e-filing is "extended" for you. Chances are slim----TurboTax and the IRS start getting ready for the upcoming tax year so they cut off e-filing for the current returns. Even though your return will be filed "timely"---that might have to be via mail, especially if you get into November. My advice is do not count on e-filing---and consider it a serendipity if it turns out you can later.
Any ideas on amending a 2021 return? The button for selecting medicaid waiver payments after you enter your W-2 information doesn't exist when I go in to try and amend my 2021 taxes. Amended my 2022's and had no trouble but i'm getting frustrated trying to figure out how to do the same with 2021. No one ever told us that these payments were "medicaid waiver payments" and that because i'm a live-in care giver that they were tax exempt! Been on the phone with Turbotax customer service/help for 20 minutes so far, mostly on hold so i'm not thinking they are going to be helpful, unfortunately.
On your 2021 return, you can enter the waiver as a negative "Other Income" amount and it will be subtracted from your wages reported on your W-2 form:
1. From the Personal Income screen in TurboTax, choose Less Common Income
2. Choose Miscellaneous Income, 1099-A, 1099-C
3. Choose Other reportable income
4. On the screen that says Other Taxable Income enter a description (Medicare waiver) and the amount as a negative number
THANK YOU! I spent a total of around 2 hours between 2 different calls with TTX this evening. The first woman was completely unknowledgeable of everything to do with my taxes. She kept telling me that the deadline had already passed when I know it hasn't, since my 2021 taxes were accepted on 4/8/22! The second woman I was on with for 1.5hrs and while she did her best and ALMOST got me to the spot you referenced, we didn't make it there but she was doing everything she and all her resources were telling her to do. I followed your instructions while still on hold with her and it worked like a charm - i've got them printed, signed and in envelopes going to the P.O. tomorrow! Hopefully 2023 taxes won't be as challenging now that we know what to do!
Can this method be applied to the 2024 tax return?
My situation is that I don't qualify for the Earned Income Credit and my taxes due increases if I remove the W2 received for the Medicare waiver, therefore I prefer to reduce my tax my entering the W2, but I'm unable to e-file? Is there any other way to include the W2 and be able to e-file?
Thanks.
Yes, you can do this. Ensure you are entering your W2 according to your situation given in these instructions: How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax?
TurboTax can exempt income under Notice 2014-7 per the IRS instructions for Medicaid Waiver payments from IHHS. 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. Additionally, you can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.