I received a w2 with wages in Box 1 for income is not subject to income tax. How do I adjust my income to offset this w2?

[yangbuck]

I live in California and filed SOC 2298 Live-In Self-Certification Form which exempts the income from both Federal and state tax (IRS Notice 2014-7) but the form has not yet been processed so the W2 reflects the income as wages. How do I make an adjustment to subtract this income from my taxable income?

Thanks!

[VolvoGirl · Accepted solution]

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 offiset it by going to
Federal Taxes
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 for it (which would be wrong) see this FAQ
https://ttlc.intuit.com/questions/2635384-qualified-medicaid-waiver-payments-on-a-w-2-show-as-earned...

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 W-2.

[robertcob55]

I also receive income on a 1099misc which without the w-2 we qualify for EIC . Will the EIC remain the same?

[yangbuck]

IF the income reported on the 1099MISC is tax exempt, you can reduce your taxable income using the information from VolvoGirl at <a rel="nofollow" target="_blank" href="https://ttlc.intuit.com/questions/3799205-i-received-a-w2-with-wages-in-box-1-for-income-is-not-subj...>. I am not familiar with EIC and cannot comment on that part of your question. Reducing reportable income to reflect only the amount that is taxable shouldn't affect  benefits under other parts of the tax code.

[alejandro291974]

I got a letter from IRS saying that I own taxes from 2018 for not including a W2. I am a caregiver for my son and we received income from IHSS. What do I have to do?

In addition my W2 from 2019 shows income on box 1 and 16

[JohnB5677]

I suggest that you file both 2018 and 2019 tax returns.  You may not owe anything but you must file.  Is there an amount in box 2.  I can't be sure, but if so, you may get a refund.

[Oschavez]

How would you claim IHSS on your Federal Return if they sent you a W-2.  (I am my child's proiver)

[Cynthiad66]

The IRS issues more than 9 out of 10 refunds in the normal time frame: less than 21 days. However, it’s possible that some tax returns may require further review and could take longer.

IRS representatives can research the status of your return only if:

• It's been more than 21 days since you received your e-file acceptance notification,
• It's been more than 6 weeks since you mailed your paper return, or
• The Where's My Refund? tool directs you to contact us.

Some common issues which may extend processing times:

• Refunds from amended returns are generally issued within 16 weeks.
• If you filed an injured spouse claim, refer to Topic No. 203 for more information.
• For refund claims with an application for an individual taxpayer identification number (ITIN) attached, refer to Topic No. 857 for more information.
• If you requested a refund of tax withheld on a Form 1042-S by filing a Form 1040-NR, allow up to 6 months from the original due date of the 1040-NR return or the date you filed the 1040-NR, whichever is later, to receive any refund due.
• The IRS expects the earliest Earned Income Tax Credit and Additional Child Tax Credit related refunds to be available in taxpayer bank accounts or on debit cards the first week of March if they chose direct deposit and there are no other issues with their tax return. Taxpayers should check Where's My Refund? for their personalized refund date.

You can also refer to Topic No. 303 for a checklist of common errors made when preparing your tax return and for additional items that may delay the processing of your return.  See the link below for actual IRS article relating to refunds.

Topic 152

[rpy]

In  2020,  I reported my IHSS Wages ( although it showed  $ 0 in Box 1 of W2) I showed the amount  in Box 3 as Wages and then showed the IHSS wage amount as negative  under Additional Income Line 8 Z referring to IRS Notice 2014-7. I received both my Federal and CA State tax refunds as calculated by Turbot tax.

In 2021 I reported it the IHSS Wages similar  to what I did in 2020,  my Federal tax refund was given to me as calcaulated by Turbo tax. However my CA State tax refund was adjusted as CA adjusted my CA AGI

 by taxing the IHSS income, and disregarded the negative amount entered under Additional Income Line 8Z.

I received a letter from CA FTB stating that me CA AGI was adjusted hence the reduction in my refund.

I want to file an amendment so I can claim my full CA Tax refund as calculated by Turbo tax.

The  Tax Audit Defense person from Turbo Tax ( since I paid for the service) told me that I need to file amended returns for both Federal and State by showing Zero in Box 1of the IHSS W 2 and removing the negative from Line 8Z.

In Turbo tax if one one puts a Zero amount in Box 1of a W2 , it requires you to print and mail a hard copy return and you cannot  E file. If I out $1  in Box 1 of the IHSS W , it allows me to Ef ile the amendment, just want to check if that OK for me to do.

Appreciate a response. 

Thanks

Renuka Yoga

[MarilynG1]

An Amended Return does not 'catch up' with your original return and correct it.  Amended returns are processed separately and can take 12-16 weeks to process.  You have up to three years to Amend your return. 

Actually, if you have $0 in Box 1 and no Federal or State Tax was withheld, you don't need to enter your W-2 at all in TurboTax.

Per Expert @CatinaT1:

"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."