No. I did not receive a W-2. I followed these instructions as per @BarbaraW22; which has a scenario in the event you do not receive a W-2.
If you are asking if IHSS payments are taxable, this depends on whether the provider lives with the recipient of the services. Per IRS Notice 2014-7 and the California Department of Social Services, wages received for In-Home Supportive Services by providers who live with the recipient of those services are not considered part of gross income for federal or state income tax purposes.
If you are asking how to report IHSS payments on your tax return, this depends on several factors:
- If you did not receive a W-2 or other tax form, you do not need to report the payments on your return. These payments are specifically exempt from income tax.
- If you received a W-2 or other tax form (such as a 1099), you should enter the information in TurboTax and then show an offset for this entry so that you will not be taxed on this income. By entering the information into TurboTax, you will reconcile your tax return with what the IRS has received and then show the corresponding offset to explain why it is not taxable. (Please see the steps listed below.)
- You can also choose to report the payments as earned income in order to receive the earned income credit or other credits, even if you did not receive a W-2 or other tax form. In a recent court case, it was ruled that Medicaid Waiver Payments and IHSS payments are considered "earned income" for purposes of calculating the earned income tax credit and other credits.
Here are the steps to enter your IHSS payments in TurboTax:
- Log into TurboTax and click on any topic to continue
- Click on Federal from the menu on the left-hand side and then click on Wages & Income at the top
- If you choose to report your payments to receive a credit: Click Edit/Add next to Job (W-2) and then click on Add a W-2.
- If you actually received a W-2 for your IHSS Payments, enter the information as reported on your W-2. Enter the amount you received for IHSS Payments in Box 1 (even if this amount is not reported in box 1 of your W-2.)
- If you did not receive a W-2, per IRS Form 1040 Instructions, you may still enter the amount of IHSS Payments in Box 1 for the purpose of claiming the credit.
- If you received a 1099 and choose not to report it as earned income to receive a credit: Scroll down to "Less Common Income" and click on Show More.
- Click on Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C. Then click on Start or Revisit next to Other reportable income and select Yes
- Enter "In-Home Supportive Services Payments, EIN # (enter EIN number from 1099)" in the description box and then enter the amount from your 1099. Click Continue.
- To enter the offset for the payments (whether you chose to report as earned income or a 1099): Click on Wages and Income at the top. Scroll down to "Less Common Income" and click on Show More.
- Click on Start or Revisit next to Miscellaneous Income and then click on Start or Revisit next to Other Reportable Income and select "Yes" or "Add Another Income Item" if applicable
- In the "Description" section, enter "IRS Notice 2014-7 excludable income" and in the "Amount" section, enter the W-2 box 1 amount (or amount of IHSS Payments) as a negative (-) number
