How to enter IHSS live-in provider W2 with Zero in Box 1?

[jackkgan]

Hi there, I have been a IHSS live-inprovider since the past few years. Hence wages box 1 and box 2 are zero, though boxes 3, 4, 5 and 6 have values.  Turbotax would not let me e-file if box 1 is zero, hence I have been excluding IHSS W2 in my previous returns. I received the following email this year. Please advise if I should continue excluding IHSS W2 or include it and Turbotax would allow me to e-file even if box 1 is zero, or how to go about . Thank you

January 13, 2025

You are receiving this notice because you are a IHSS and/or WPCS provider, who has an In-Home Supportive Services (IHSS) Program And Waiver Personal Care Services (WPCS) Program Live-In Self-Certification Form For Federal And State Tax Wage Exclusion (SOC 2298) on file. Due to a change in the Internal Revenue Service (IRS) regulations, providers who have submitted an SOC 2298, will begin receiving W-2 forms each year starting with the 2024 Tax Year. In accordance with revised IRS regulations, federal, state, and local non-taxable income will appear on your W-2 form in Box 12-II.

[CatinaT1]

Yes, you can enter this and still e-file. 

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.     

If you received a W-2 with $0 in Box 1:  

1. Sign in to TurboTax Online, click Continue to your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);     
2. Click on Federal Taxes, and then click on Wages & Income;     
3. Under Wages and Income, click Start;      
4. Click on Work on my W-2, and enter the information as reported on your W-2.     
5. After entering all your W-2s, you will see the screen, Let’s check for uncommon situations. Next to Nontaxable Medicaid waiver payments, check the box.  
6. You will enter the amount of Medicaid Waiver Payments into the box asking for the total amount of difficulty of care payment you received from IHHS. This will be the same amount reported in Boxes 3 and 5 of your W-2.  
7. When you get to the Earned Income Credit section under the  Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.  

If you received a 1099 or no form:  

1. Sign in to TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);     
2. Click on Federal Taxes, and then click on Wages & Income;     
3. Scroll down to Less Common Income;       
4. Click on Start next to Miscellaneous Income, 1099-A, 1099-C.  
5. Click on Start next to, Other income not already reported on a Form W-2 or Form 1099;      
6. Answer Yes to Did you receive any other wages?;      
7. Leave blank the box for Wages earned as a household employee and click continue;  
8. Leave blank the box for Sick or disability pay and click continue;       
9. Enter the amount of Medicaid waiver payments on Certain nontaxable Medicaid waiver payments not reported on Form W-2, and click Continue.  
10. When you get to the Earned Income Credit section under the  Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.  

For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs.    

[jackkgan]

Thank you so much! I imported my IHSS W2 in Turbo Tax Premier on my mac. Request your advice for below:

1) All the values got imported except box 12a II which has 38k in my W2. Please advise what to do.. Should I manually choose drop down 12 A in Turbo Tax which says Uncollected Social Security and that 38K manually, should I choose 12A II which says "Medicaid waiver payments excluded from gross income under notice 2014-7?

2) Box 15 seems to be empty in  Turbox after importing the W2 , but it shows CA in my W2. So I added that manually.

3) I don't see "Nontaxable Medicaid waiver payments" under "Let’s check for uncommon situations." . I only see following options.

[CatinaT1]

Yes, you can manually enter it. You would enter it just like it is on your W2, which I assume is the "Medicaid waiver payments excluded from gross income under notice 2014-7".

[jackkgan]

Thank you. But I don't see the option  "Nontaxable Medicaid waiver payments" under "Let’s check for uncommon situations." as per your advice. I only see options that I had posted in the picture. Please advise.

[CatinaT1]

These instructions have been updated.  Ensure you enter it according to these instructions: How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax?

[jackkgan]

Thank you, but that link How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax? does not seem to have the instructions for Box 12a II which has dollar amount. It suggests entering the dollar value from box 3 into box 1 but my income would not be taxable as I am live-in provider. That method is increasing the taxes when I enter unnecessarily.

Also, the instructions in How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax? don't seem to match the latest TurboTax screen. Example :On the Let’s check for uncommon situations screen, select the box next to Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.

But there is NO "Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.:" option in the "Let’s check for uncommon situations screen" Please let me know if I am missing anything. Thank you.

[ThomasM125]

Since you don't have taxable income in box 1, you don't need to enter the W-2 form in TurboTax unless you have tax withheld reported in boxes 2, 17 or 19.

If you want the income to be considered for earned income credit purposes, you can enter it as follows:

1. Navigate to Less Common Income in the Wages and Income section of TurboTax

2. Choose Miscellaneous Income, 1099-A, 1099-C

3. Choose Other Income not already reported on a Form W-2 or Form 1099

4. As "yes" on the screen that says Other Wages Received

5. On the screen that says Certain nontaxable Medicaid waiver payments not reported on Form W-2 or 1099 enter your Medicaid waiver payments 

[jackkgan]

Thank you so much for your response. Boxes 1, 2, 17 and 19 are zero in my W2.

The only boxes having dollar values are boxes 3, 4, 5, 6, 12a II and 14.

Sorry that I am confused which instructions to follow as CatinaT1 informed that we need to follow instructions in How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax? but those don't seem to apply to the latest Turbo Tax as I can't find "Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.:" option in the "Let’s check for uncommon situations screen" . (Screen shot I posted above)

Moreover, if I follow those instructions where step 4 says "If you have a number instead of zero in Box 3, enter that number again in Box 1., Turbotax is calculating more tax that I don't owe.

Please confirm if I am missing something in my understanding or if the instructions are stale or not applicable to latest TurboTax or tax rules. . Thanks again.

[AmyC]

Follow thee steps:

1. In How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax? you must be entering the w2. Return to the income section and edit the w2.

2. Once you enter the wages section, select continue. 

3. The next screen says Let's check for uncommon situations. 

4. Select Medicaid and continue.

[jackkgan]

Thanks Amy! I realized that the screen "Let's check for uncommon situations" has the "Nontaxable Medicaid Waiver..." value if I don't enter the values from Box 12 in my W2 and leave it empty as shown in the 2nd screen shot below. Please confirm if I should NOT enter the values from Box 12 II into TurboTax while entering the W2. 

The instructions in https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-w-2/qualified-medicaid-waiver-payme... say "Enter all your W-2 info as shown on your form, except Box 1" but they don't say that I should NOT enter Box 12. Please confirm if the instructions are incomplete or am I missing something in my understanding. Thank you.

If I don't enter the values in Box 12 II of my W2 into TurboTax, then below is shown "Let's check for uncommon situations"

[DaveF1006]

No.  you will not enter anything in Box 12. When you check the box under let's Check for Common Situations>non-Taxable Medicaid Waiver Payments that qualify as Difficulty of Aid payments, there will be a screen that appears next that asks how much of Box 1 of the W2 are these types of payments. Here you will record an amount which will reduce your taxable income by the amount you record. Here is a screenshot that illustrates what I just said.

 

[jackkgan]

Thanks DaveF1006. , that's helpful.

1. I understand from your post that I should not enter the value from Box 12 II (though my W2 has it), and that I should enter that value later in  let's Check for Common Situations>non-Taxable Medicaid Waiver Payments that qualify as Difficulty of Aid payments.

2. Please help me understand why it says that box 5 may be incorrect.

3. The other missing value when I import W2 in Turbo Tax is Box 15 State. Please confirm if  it ok to manually enter that as California or leave that blank? (The field Employee State ID number is blank.) Making sure that Turbo Tax import did not intentionally ignore it during import.

Thanks again!

[AmyC]

1. The program says it may  be incorrect because it doesn't match. It is a warning for others.

2. Not shown in the question

3. The state boxes must either all be filled in or all be left blank. Without the ID, all blank is the correct answer.

You should be good to go!

[jackkgan]

Sorry AmyC. I understood the other 2 answers, but I could not understand why it says "Based on your total wages, the Medicare wages in box 5 may be incorrect." The amount of Box 5 in TurboTax is  exactly the same amount as my W2. Thanks again for patiently answering my questions.