I don't know where to enter the IHSS tax exempt for IRS

[Frankenghoul]

I have the same issue. I was taking care of a family member who lived in our home and my w2 for ihss does not say zeros it has numbers in all those spots. How would I fill this out to file my taxes?!

[CatinaT1]

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. 

If these payments are paid to you in box 1 of form W-2 (they should not), first try to get a corrected Form W-2 from the payer. If you cannot get a corrected Form W-2, follow these steps: Do not enter the W-2 in the Wages & Salaries topic. Instead enter it as Other Reportable Income under the Miscellaneous Income section. Take the following steps: 

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);

1. Click on Federal Taxes at the top of the screen;
2. At the bottom of Your Income box pick the option in blue to help me add other income, then jump to full list;
3. Scroll down the page to the last section titled: Less common Income and click show more;
4. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
5. Scroll down to the last option titled Other reportable income and select start or edit;
6. When it asks, "Any other reportable income?" say yes then you will make two entries:
7. 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.
8. 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. 

If your W-2 has federal or state taxes withheld, you can enter these amounts in the Deductions & Credits section under Other Income Taxes as Withholding not already entered on W-2.

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

[pahiua]

Thank you for this information. I'm not seeing where to enter the offset information under Review and don't see a place for Miscellaneous Income either. I gather the website has been revised since last year. Can you help?

[DianeW777]

Yes. Enter your W-2 as usual like any other W-2.  Next follow these steps to complete the action of removing this income from your return.

1. Scroll down the page to the last section titled: Less common Income and click show more;
2. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
3. Scroll down to the last option titled Other reportable income and select start or edit;
4. When it asks, "Any other reportable income?" say yes then you will make one entry
5. Enter this description: IRS Notice 2014-7 excludable income and enter the W-2 Box 1 amount as a Negative (-) number

When you return to the Wages & Income page, scroll to see the negative income beside Miscellaneous Income, 1099-A, 1099-C; This will remove the income on your return for the IHSS or other payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver program.

[noneliveforer]

Hi, I also received a W-2. I have my own house but currently living with the recipient 24/7 for the last two years.   Does that make the income exempt? Thank you!!

[CatinaT1]

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

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.  Steps are listed above on how to enter this.

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

[allimacsnwod]

 I have followed these instructions and everything worked.

However, I will not be getting a W-2, and the company says I will not get a 1099, so I do not have a tax id number for them. When attempting to e-file, Turbo Tax returns a message that a tax id number is needed. Is there a way around this, or do I need to do something different?

Thank you!

[allimacsnwod]

I have followed these instructions and everything worked.

However, I will not be getting a W-2, and the company says I will not get a 1099, so I do not have a tax id number for them. When attempting to e-file, Turbo Tax returns a message that a tax id number is needed. Is there a way around this, or do I need to do something different?

Thank you!

[KaeAndColesMom]

I'm trying to file my exempt income without a W-2 as well. Did you figure a way to file yours with TurboTax or did you end up having to file a paper return?

[kris58]

I used turbo tax and entered it in Schedule 1

line 8 Other income. List type and amount: IRS Notice 2014-7 excludable income with the description below:

EIN: xxxxxxx - In-Home Supportive Services Payments.

The amount on line 8 is the income you received with a negative sign.  For example, if you received $500, then enter -500. Note the negative sign and is important

This amount is then copied by the Turbo tax to line 7a Form 1040 (if you are using it)

Good Luck.

[Danasj]

I had received a W-2 but the income should be exempt.  I did file electronically.. I did what the person below suggested with the negative sign. 

[allimacsnwod]

It looks like you may have gotten your answer. Sorry for the delay. Yes, I was able to file electronically. I got the tax id # from the company that pays me, and entered it. 

[Sunstar21]

I just read your post on how to exempt IHSS income and I am a little confused. Do I enter income on line 1 wages and then exempt that out or add it to other income and then exempt it out of there. Also will doing it the second way allow me to claim the EIC?

[MarilynG1]

If your want your income to count for EIC, enter it as Wages Reported on a W-2 (EIC = Earned Income Credit). Enter the amount of income you received, even if your W-2 has $0 in Box 1. 

Then enter the same amount as a negative entry in Miscellaneous Income > Other Reportable Income with the description of 'Exempt Income IRS Notice 2014-7'.

This will both show the W-2 income on your return (for EIC) and explain why it is not taxable (negative entry in Other Reportable Income).

Click this link for more info on Entering IHSS Income for EIC.

[cfccofmfo]

You need to file form SOD 2298. You can get you can get the form off the IHSS Website.