How do I file the taxes if I'm an IHSS provider?

[DanielV01]

You probably don't.  IHSS payments are nontaxable and nonreportable income if you live with the person who needs the assistance you are providing.

[meri2991]

But I don't live with the person who I care for

[DanielV01]

Do you have amounts in box 1 and 16 of your W2?  This is CA, correct?  I don't want to assume.

[meri2991]

It has amounts in all except from 7-13. I also have 2 W2s one of them doesn't have an amount in box 2, and yes it's CA

[DanielV01 · Accepted solution]

You will enter the W-2s as if you work for a traditional employer.  Because you do not live in the home for the person you are providing services for, this Medicaid Waiver payment is still taxable.  A blank box 2 only means that Federal taxes were not withheld from your income, but the wage amount reported in box 1 is still taxaable.  The following California FTB (Franchise Tax Board) website link describes why:  California IHSS Payments

You may see other posts related to these payments about Notice 2014-7.  That notice will not apply to you, as described in the link I provided, because the care you provide is outside of your home.  

Fortunately, the provider has withheld appropriately the correct taxes (Boxes 7-13 are very often blank on Forms W-2, so what you see is normal)

[lrsdranger82nd]

I live with my 2 sons who I provide IHSS care for in the state of CA however I see wages on 1 and 16 everything has been life as far as the Tax exemption. I just wanna make sure I do this right and avoid problems with the IRS, thank you for the help! 

[JamesG1]

You have received a W-2 and income is reported in boxes 1 and 16?

This help addresses CA IHSS payments.

Note in this TurboTax Help that you may yet be contacted by the IRS.  Their first reflex is to question why you are not reporting income reported on a W-2.

[lrsdranger82nd]

yes the W2 has a amounts on both lines 1 and 16 

[JamesG1]

Were you told that your payments would not be taxable income under IRS Notice 2014-7?

It sounds like you would qualify for the exclusion of the W-2 box 1 amount from your taxable income.

IRS Notice 2014-7 can be found at this link.  Click on the hyperlink Notice 2014-7 in the center of the page.

Certain Medicaid Waiver Payments for In-Home support services are excludable from gross income and should not be included in your earned income.  This is the case even if you have received a W-2 for performing these services.

If you have received a W-2, this help explains how to enter the income and then remove it from your taxable income.

Be sure to retain all your documentation.  The IRS is likely to ask questions about this income at some later time.

[lrsdranger82nd]

Thank you for the input! I have all documentation saved and ready. 

[johno1064]

If you live with the person that you care for and you "want" to report your wages. Fill out W2 as normal and then in box 14 if you scroll down the list to medicaid waiver or payment and enter the wages again this will make them non taxable. You can also choose not to report this income but you may be contacted about these wages but as long as you have the proof that they lived with you then you should be okay.

[gitzelbedolla]

I don't see that option on section 14 please help!!

[LeonardS]

IHSS payments are non-taxable and non-reportable income if you live with the person who needs the assistance you are providing.  You do not have to file a tax return when you qualify as an IHSS provider.

[Davidg1960]

It would be great if there would be an interview section within the software/online filing to mention this. As you are aware, in the state of California a W-2 is generated with Line 1 wages as $0, but other required withholdings are included to assume for a non-professional filer, that it needs to be reported on their taxes. In addition, I file as married and my Wife has reportable income. I spend hours completing the online questionnaire, only to be rejected for e-filing. If I knew that I didn't need to include my W-2, It would have saved me a lot of time.

Appreciate the answer from the expert in any case.