IHSS Income in Federal and State Tax Return

[CatinaT1]

The entry for IHHS income changed this year. You will enter your W2, even though it shows $0 in box 1. This will also allow you to claim earned income credit. 

If you did not receive a W2, see the instructions further down.

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. You can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.  

    

This is how you will enter your W2: 

1. Sign into 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 from the menu on the left-hand side and then click on Wages & Income at the top;  
3. Click Edit/Add next to Job (W-2);   
4. click on Add a W-2; and enter the information as reported on your W-2.  
5. After you have entered all your W-2s, you will see a screen that looks like this, asking for uncommon situations. Make sure you check the box for Nontaxable Medicaid waiver payments.   

You will then get to choose whether you want to include the income for Earned Income Credit.  

If you received a 1099-Misc instead of a W2 these instructions have changed as well:

Follow these instructions to enter it:   

1. Click on Wages and Income at the top of the screen  
2. Scroll down to "Less Common Income";    
3. click on Show More;   
4. click on Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C;   
5. click on Start or Revisit next to Other income not already reported on a Form W-2 or Form 1099;   
6. Did you receive other wages? Say yes;   
7. Wages earned as a household employee, leave blank and click continue;   
8. Sick or disability pay, leave blank and click continue;    
9. The next question asks about non-taxable Medicaid waiver payments. Enter the amount here,   
10. Click Continue.    

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

[ssok1]

Will I still be able to file online? I was not able to after doing what you said. Also, after I check that box for the waiver, it asks how much is the amount it applies to and I don't know what to put there. I put zero since that's what it says in box1 and I still can't e-file. 

[DMarkM1]

After entering/verifying your W2 with zero in box 1 and amounts in boxes 3-6, select the "Nontaxable Medicaid waiver payments that qualify as difficulty of care payments" option.  When asked to "Enter the total amount of difficulty of care payments" enter all your payments. It should be the amount in box 5 on your W2.

This procedure will not put the difficulty of care in line 1a but will put it on line 1d to count as part of your earned income to allow any applicable credits that require earned income.  This also adds a corresponding negative amount on Schedule 1, line 8s which flows to line 8 on your form 1040.  This makes the payments nontaxable. 

You should be able to e-file with these entries.

You can see all of these entries on the forms using forms mode in desktop versions or following the steps below for online versions of TurboTax.

1. Select "Tax Tools" in the left hand menu
2. Select "Tools"
3. Select "View Tax Summary"
4. Select "Preview My 1040" in the left hand menu

[thespicymonkey]

I was not provided with a W-2 and after contacting IHSS payroll, they said that I will not receive since I am a liv-in provider and the income is not taxable and doesn't need to be reported. I don't hav eotehr income. Does that mean I just shouldn't file taxes, or do I still fill out wy 1040 in a similar manner as listed above?

[CatinaT1]

You didn't a form at all for this income? Not even a 1099-Misc. Usually, you will receive a W2 or a 1099-Misc.

Follow these instructions to enter the income without a W2.:    

1. Click on Wages and Income at the top of the screen   
2. Scroll down to "Less Common Income";     
3. click on Show More;    
4. click on Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C;    
5. click on Start or Revisit next to Other income not already reported on a Form W-2 or Form 1099;    
6. Did you receive other wages? Say yes;    
7. Wages earned as a household employee, leave blank and click continue;    
8. Sick or disability pay, leave blank and click continue;     
9. The next question asks about non-taxable Medicaid waiver payments. Enter the amount here,    
10. Click Continue.     

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

[thespicymonkey]

Yes, In my county at least, they do not provide those if you ar a live in provider. Thanks for the response.

[thespicymonkey]

When I do this, it shows that I have earned my wages are the full amount of my paycheck and not 0 there fore making me ineleigible for the EITC. In past years wehn I recieved a w-2, it would show my income form ihss as 0 but i would still qualify for the EITC. Has this changed?

[CatinaT1]

You said you did not receive a W2. Did you have other income besides the IHHS income? Any other income would be used in the calculation of EITC.  

If you followed the instructions above for entering, it will not be taxable income but can be used as income in calculating the EITC.

Review that you entered everything according to the instructions above and did not enter it under household employee or sick and disability pay.

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. 

[g1steli2]

Yes, please follow the instructions from CatinaT1's post.

[g1steli2]

Please follow the instructions from here.

https://ttlc.intuit.com/community/taxes/discussion/re-ihss-income-in-federal-and-state-tax-return/01...

[techiemom]

@g1steli2 

Thank you so much