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 do not have a W2 and want to use this income to qualify for earned income, here is how you will enter it.:
- Click on Wages and Income at the top of the screen
- Scroll down to "Less Common Income";
- click on Show More;
- click on Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C;
- click on Start or Revisit next to Other income not already reported on a Form W-2 or Form 1099;
- Did you receive other wages, say yes;
- Wages earned as a household employee, leave blank and click continue;
- Sick or disability pay, leave blank and click continue;
- The next question asks about non-taxable Medicaid waiver payments, enter the amount here,
- Click Continue.
For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs.
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