This TurboTax FAQ may help you enter the income so that it will be reported but not taxed:
No. The In Home Supportive Services (IHSS) is not considered taxable income. See the information below.
SACRAMENTO- The Internal Revenue Service (IRS) has informed the California Department of Social Services (CDSS) (read IRS letter) that the IHSS wages received by IHSS providers who live with the recipient of those services are not considered part of "gross income" for purposes of federal income taxes.
For more information on this topic you can click the link here: Federal Income Taxes on In-Home Supportive Services (IHSS) Wages
Here’s some info I wrote up about how to enter it.
There are a couple ways to enter a W2 for IHSS wages.
1. Enter the W2 as normal wages on line 7.
Then make an entry on 1040 line 21 Other Income to offset it by going to Federal on left
Wages and Income
Scroll way down to the end - Less Common Income
Click start or update next to the last one "miscellaneous income"
Then the last one for Other Reportable Income
For description enter “Notice 2014-7” . Enter the amount with a minus sign (-) in front of it.
2. Or when you enter the W2 it gives you the EIC credit (which would be wrong) See this FAQ
<a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/2635384-qualified-medicaid-waiver-payments-on-a-w-2-show-as-earned-income-for-eic">https://ttlc.intuit.com/questions/2635384-qualified-medicaid-waiver-payments-on-a-w-2-show-as-earned-income-for-eic</a>
So you either completely exclude the W2 from your return or enter it under Miscellaneous income. To enter it as Misc Income use the same steps as above and you will make 2 entries.
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.
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.
Then if your W-2 has federal or state taxes withheld, you can enter these amounts in the Deductions & Credits section under Estimates and Other Taxes Paid, or Other Income Taxes Paid as Withholding not already entered on a W-2.