I receive IHSS payments for my son and this should be tax exempt in my case. Where do I document this or how do I get it to show up in the system?

Yes, 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);
2. Click on Federal Taxes at the top of the screen;
3. At the bottom of Your Income box pick the option in blue to help me add other income, then jump to full list;
4. Scroll down the page to the last section titled: Less common Income and click show more;
5. Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
6. Scroll down to the last option titled Other reportable income and select start or edit;
7. When it asks, "Any other reportable income?" say yes then you will make two entries:
8. 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.
9. 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.

I called IHSS. Not everyone who gets IHSS payments can claim them as tax exempt. IHSS said the situation has to be a biological relative, e.g., mother taking care of a son, and the two live in the same domicile.  And here's a slightly different answer from the one above from the IRS publication, <a rel="nofollow" target="_blank" href="https://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income">https://www.irs.gov/Individuals/Certain-Medicaid-Waiver-Payments-May-Be-Excludable-From-Income</a>. Basically, put your W2 IHSS income in the normal spot but put the negative value of that under Misc. Income, line 21, as described above.

If you are not able to obtain a Form W-2c, Corrected Wage and Tax Statement, from the agency reporting the correct amount in box 1 of Form W-2, you should include the full amount of the payments reported in box 1 of Form W-2 as wages on line 7 of Form 1040. You should then subtract the excludable portion of the amount in box 1 on line 21 “Other income,” of Form 1040. If you have other income reportable on line 21, you should enter the net amount after subtracting the amount excludable from gross income under Notice 2014-7 from the other amounts reportable on line 21. You may need to enter a negative amount on line 21 if you have no other income reportable on line 21, or if the amount of other income you must report on line 21 is less than the amount excludable from gross income. You should write “Notice 2014-7” on the dotted line for line 21 if you file a paper return, or enter “Notice 2014-7” on line 21 for an electronically filed return.

how to file this ihss for state tax return?

Is there an updated way to enter this for this year's taxes? This worked for me last year and I didn't have any issues. Now, it won't let me file and says I cannot file because "TP other earned inc shouldn't be less than zero" and shows me the line with the negative number to balance out that excludable income.