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Level 2
posted Feb 18, 2023 4:33:10 PM

Medicaid Waiver Payments or IHSS before submit form SOC 2298. Is the W2 box 1 income taxable or nontaxable?

Hello.

This is my first time working as a IHSS provider and I live with the recipient. I received my paychecks without submitting the SOC 2298 form. I submitted the SOC 2298 form after I received a few paychecks later. Now, I received my 2022 W2 with partial income on box 1. I know the income after I submitted the SOC form 2298 is nontaxable. What about the partial income on W2 box 1? Is this income taxable?

 

 

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1 Best answer
Expert Alumni
Feb 18, 2023 4:57:18 PM

No, the income is not taxable.  The instructions below include steps to enter the payments as earned income to receive a credit or to report them as unearned income. Either way the payments will not be subject to federal or California state income taxes.

  1. Log into TurboTax and click on any topic to continue
  2. Click on Federal from the menu on the left-hand side and then click on Wages & Income at the top
  3. 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.
  4. 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.)
  5. If you choose not to report it as earned income to receive a credit: Scroll down to "Less Common Income" and click on Show More.
  6. 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
  7. Enter "In-Home Support Services Payments, EIN # (enter EIN number from W-2)" in the description box and then enter the amount from your W-2. Click Continue.
  8. To enter the offset for the payments (whether you chose to report as earned income or not): Click on Wages and Income at the top of the screen. Scroll down to "Less Common Income" and click on Show More.
  9. 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
  10. 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.

3 Replies
Expert Alumni
Feb 18, 2023 4:57:18 PM

No, the income is not taxable.  The instructions below include steps to enter the payments as earned income to receive a credit or to report them as unearned income. Either way the payments will not be subject to federal or California state income taxes.

  1. Log into TurboTax and click on any topic to continue
  2. Click on Federal from the menu on the left-hand side and then click on Wages & Income at the top
  3. 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.
  4. 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.)
  5. If you choose not to report it as earned income to receive a credit: Scroll down to "Less Common Income" and click on Show More.
  6. 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
  7. Enter "In-Home Support Services Payments, EIN # (enter EIN number from W-2)" in the description box and then enter the amount from your W-2. Click Continue.
  8. To enter the offset for the payments (whether you chose to report as earned income or not): Click on Wages and Income at the top of the screen. Scroll down to "Less Common Income" and click on Show More.
  9. 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
  10. 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.

Level 2
Feb 18, 2023 5:49:01 PM

Are you sure is not taxable? I just found this and I am confused.

 

"When can I expect my Live-In Self-Certification Form To Be Processed?
Your wages will continue to be included as federal and state taxable wages until a correct and fully completed Live-In Self-Certification Form is processed. "

 

https://www.cdss.ca.gov/inforesources/ihss/live-in-provider-self-certification

Expert Alumni
Feb 18, 2023 7:12:59 PM

This is directly from the link you provided: "Under Internal Revenue Service (IRS) Notice 2014-7, the wages received by WPCS providers who live with the recipient of those services are not considered part of gross income for purposes of Federal Income Tax (FIT). On March 1, 2016, CDSS received a ruling from the IRS that IHSS wages received by IHSS providers who live in the same home with the recipient of those services are also excluded from gross income for purposes of FIT. This ruling applies to State Income Tax (SIT) as well."

 

The part that you refer to regards the SOC2298, which allows the CDSS to stop reporting the income on the W2 so you do not have to file a tax return. 

 

@megank1