If your W-2 shows "00" in all boxes except Box 12a, the amount in Box 12a with code "II" represents Medicaid waiver payments. These payments are generally excludable from gross income under IRS Notice 2014-7.
Here’s how to handle them in TurboTax:
By following these steps, TurboTax can handle your tax-exempt Medicaid waiver payments. For detailed guidance, refer to TurboTax's support article: How do I enter my tax-exempt Medicaid waiver payments from IHSS in TurboTax?
But my W-2 does not have any amount in boxes 3, 5 , they are blank. It is only $ amount in box 12a. What would I add under non taxable waiver payments if the amount needs to match on what states in boxes 3, 5 ?
If your income was "difficulty of care" Medicaid payments then they should not be listed in Box 1 or 2
BUT you still paid into Social Security and Medicare and it should list how much of your DOC payments
went into each. My point being, those boxes should not be left blank. I would call and make sure
those are intentionally left blank. With those boxes blank you are not getting credited for contributing
into your social security and Medicare and will hurt you when you retire and want to draw on your
SS payments.
I believe it is intentionally left blank as I have been granted the live in caregiver and therefore my payments had no deductions for Social Security and Medicare… and also aware how that affects me when I retire. I just want to know how to file, enter my W-2 information in my tax return as last year I didn’t receive one
I was also granted the live in care exemption so the payments are not considered income and I do not pay taxes on the payments. Not paying taxes on difficulty of care payments is something completely different than your employer or fiscal agent not contributing to Social Security and Medicare which are FICA and FUTA taxes (which also includes unemployment taxes etc.)
"Notice 2014-7, issued on January 3, 2014, provided guidance that deemed the difficulty of care payments as not subject to federal income tax. However, the notice was silent regarding implications related to employment taxes, specifically FICA and FUTA. Additional guidance issued in the fall of 2022 concludes that difficulty of care payments are subject to FICA and FUTA taxes unless an exemption applies."
That being said, if you don't have earned income and Box 1 and 2 left blank then you don't have to file.
How is the right way to file my taxes then? Just reporting exactly how it is in my W-2 , nothing in all the boxes but 12a?
You need to access your pay stubs...... If these are Difficulty of Care payments then each pay stub should
have nothing listed for wages and also nothing taken out for Federal Income. The next few lines list how much of your pay that pay period was taken out for Medicare and then how much taken out for Social Security. If these were not deducted from your pay then you may owe employment taxes and the w-2 is correct in leaving everything blank except box 12. When you file your taxes input the exact info from you w-2. If you were having SS and Medicare taxes taken out of your pay each week/bi-weekly then you need to call your employer and find out why your w-2 isn't reflecting these deductions and get a corrected W-2. Please see below from the IRS website:
A12. Maybe. Whether the payments are subject to social security and Medicare taxes depends on whether you are an employee of the agency, an employee of the individual care recipient, or an independent contractor. If the agency is your employer, the payments are subject to social security and Medicare taxes. See Q&A 18 under Agency Questions. If the care recipient is your employer and these payments are wages for that employment, the payments are subject to social security and Medicare taxes unless one of the exceptions for domestic services applies. See Q&A 19 under Agency Questions. If you are an independent contractor, the payments are not subject to social security and Medicare taxes. See Q&As 13 and 14.
Your status as an employee or independent contractor and the identification of your employer (if you are an employee) depend on whether the agency or the care recipient has the right to direct and control how you perform your services. Tax Topic 762, provides information and additional resources on how to determine whether you are an employee and, if so, who your employer is. If you think you are being improperly treated, you can file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding, to have the IRS determine your employment status.
If you believe social security and Medicare taxes were withheld in error from your payments, such as because one of the exceptions for domestic services applied, you must first contact the agency that withheld the taxes for a refund. However, if the agency indicates an intention not to file a claim or adjust the overpaid social security and Medicare taxes, you may claim a refund of the erroneously withheld social security and Medicare taxes by filing Form 843, Claim for Refund and Request for Abatement. The requirements for filing a claim for refund of your share of social security and Medicare taxes can be found in the Instructions for Form 843.
Hi,
These are the only options I see under 'Let's check for uncommon situations':
W-2 was corrected by my employer (Form W-2c)
Didn't get a W-2 (manually calculate my earnings)
Unreported tips
Paid family leave
Nonqualified pension plan not on my W-2
Worked outside the U.S.
Religious employment
Inmate or lived in a halfway house
Employed by a foreign government or international organization
None of these apply to me
To clarify, what version of Turbo Tax are you using? Do you have a W2 with 00 in Box 1 and an entry in Box 12 with the code II?
Hi,
Using Turbotax Premier. My W-2 shows '0.00' in boxes 1 - 11 (i.e not just blank), and shows 'II' and the dollar amount in box 12a.
Also, when I go to the 'Forms' view after entering the W-2, the dollar amount from box 12a shows up on line 1d and line 8 (as a negative) on Form 1040. However, Turbotax will not let me e-file b/c Box 1 on the W-2 is blank.
If you are not trying to claim the Earned Income credit or Additional Child Tax credit, you can leave the W-2 off your tax return and just keep it with your records. See the last note on this TurboTax FAQ.
Some TurboTax customers with a W-2 with a code II in box 12 for Medicaid waiver payments excluded from income may notice an issue where these payments aren't being excluded.
We’re currently working to resolve this issue. If you’d like to receive progress updates, see this TurboTax FAQ
Hi,
I am claiming the 'Child and Other Dependents Tax Credit' since my adult son is disabled, incapable of doing work, and lives with us 24/7. Does that mean I that must include this W-2 in my return?
Also, this is the first year that a W-2 form has been issued. Previously, I would enter this payment under 'Miscellaneous Income - Nontaxable Medicaid Waiver Payments not reported on a form W-2 or 1099', and Turbotax would then back this amount out on Line 8, Form 1040.
Can I still do that even if I DID get a W-2? The math comes out the same on the 1040.
Since you received a W-2 you will need to include it in your return if you are already filing a return, however, you can choose to either include it or exclude it for EITC calculations. The best way to enter this, since you have all 0's elsewhere is by entering it the same way you did in previous years as Nontaxable Medicaid Waiver Payments not reported on a form W-2 or 1099. This will again have the income backed out for you the same way it has in the past. The fact that you have a W-2 will not change how the income is treated. It is just telling the IRS that it is there so even though it is not taxable income, it is best to report it if you are otherwise filing a return.