Going on 3 years now, Turbotax has been improperly calculating Medicaid Waiver Payments with regard to the 2014-7 tax law change in 2019 from the Feigh vs Comm ruling.
Turbotax has been incorrectly applying Medicaid Waiver Payment income to BOTH the EIC and the ACTC automatically whenever the taxpayer opts to include it as earned income. This is a result of a widespread misunderstanding of the new tax law stemming from an error published by VITA (which has since been corrected in a more recent update)
The law clearly states that taxpayers with Medicaid Waiver Payments (live-in providers) can choose to include their MWP income for the EIC OR the ACTC or BOTH. The MWP income IS NOT REQUIRED to be applied to BOTH the EIC and the ACTC. Taxpayers ARE ALLOWED to use their MWP income for ONLY ONE of the two credits (EIC or ACTC) if they choose to do so.
This affects all live-in providers (with children) who have MWP income AND additional self employment income. Using MWP income for only the ACTC and NOT the EIC can maximize refund amount because the EIC can be calculated using only the self employment income.
For the last 3 years Turbotax has not been allowing this option, which has essentially cheated many live-in MWP taxpayers out of recieving the maximum refund that they are entitled to.
I have brought this issue to the attention of Turbotax staff many, many times and still the problem has not been corrected.
Turbotax is not the only one affected by this misunderstanding of the new law. Many of the other major filing companies are also adhering to the same MWP income carryover mistake.
