Under IRS Notice 2014-7, 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 excludable from income under § 131 of the Internal Revenue Code. If that's your situation, you'll want to make another entry in TurboTax to offset the W-2 income you reported under this program.
Please go to Federal Taxes>Wages & Income>Less Common Income>Miscellaneous Income>Other Reportable Income. Answer "yes" on the next screen. On the screen after that, enter "Tax Exempt income per IRS Notice 2014-7. Enter a negative number for the amount you were paid under the program.
Please be aware that it is unclear whether your income is also exempt from FICA and FUTA tax. Also, the income may still be subject to income taxes by your state taxing authority.
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