2014-7 Difficulty of care act

[CpeGeo]

Absolutely do not enter your 2014-7 qualified income in this way if you received a W-2 or you will get a CP2000 letter from the IRS.

The correct way to enter this information is as follows:

Enter the W-2 information as you normally would any other W-2.

Then in form schedule 1 line 8 "Other reportable income" you want to enter a negative number equal to the amount that qualifies for 2014-7. Be sure to put a description of: "IRS Notice 2014-7 excludable income"

Do not just use the W-2 Box 1 amount as your 2014-7 excludable income when entering the negative value in schedule 1. Contact your employer and request documentation of proof of 2014-7 eligibility with the amount.

[amberpatnaude]

I received a 1099-NEC, how am I supposed to enter it on turbo as the exclusion for 2014-7? When filling out 1099-NEC, turbotax does not provide a spot to enter exclusions besides "expenses".

[JamesG1]

IRS Notice 2014-7 payments are not taxable and not reportable.  But since you have received a 1099, you want to acknowledge to the IRS that you are in receipt of the form.  You want to record the 1099 income, then immediately reverse the entry in the tax return.  Follow these steps.

• Select Federal from the left side menu.
• Click on Wages & Income.
• Scroll down to Less Common Income.  Click Show more.
• Click Start / Revisit to the right of Miscellaneous income….
• Click Start / Revisit to the right of Other reportable income.
• At the screen Other Taxable Income enter ‘IRS Notice 2014-7 payments’.
• At the screen Other Miscellaneous Income Summary, click Add another miscellaneous item.
• Enter the same description but enter the payment amount as a negative number.

View the entries at Tax Tools / Print Center / Print, save or preview this year's return / Include government and TurboTax worksheets.

The entries will be reported on the worksheets within your tax return.

[amberpatnaude]

@JamesG1 Just to confirm, I would add the income in the miscellaneous and then re input it in the same spot with the same numbers, but negative. Correct? Thank you so much!

[jeansavoy6971]

I am also trying to figure out how to enter this on my taxes. @amberpatnaude  Did you ever figure this out?

[TeresaM]

If you qualify to exclude the income from federal taxes under the 2014-7 Difficulty of Care Act, the amount in box 1 of your Form W-2 is exempt from federal tax. However, the number from box 1 is also used to calculate Earned Income Credits and other tax situations that look at earned income. If you have the number from boxes 3 and 5 also entered in box 1, the calculations in those areas will be correct.

This TurboTax Help article explains how to leave the number in box 1 but also remove it from the calculation for taxable income. There are related links at the bottom of the article for more information about IRS Notice 2014-7.  If you enter it in this way in the federal return, it will be treated correctly when the income flows to the state return.

How to enter excluded Medicaid waiver payments in TurboTax

There is more information about the exclusion of Medicaid waiver payments at this IRS website Medicaid Waiver Payments

[amberpatnaude]

Yes, I just followed what the expert reply was..

So, for example, I went to the uncommon income types and went to other/miscellaneous and then to other reportable income. From there, I typed in irs notice 2014-7 payment and input the amount from the 1099. Then I added another one with the same description and amount, except for the amount, I put it as a negative amount so it would deduct it. 

[Beattitude]

I have a Medicaid waiver for IHSS. I DO NOT receive a W-2 but I was told I could take my earnings for 2021 (YTD gross pay) and enter it as miscellaneous income to get child tax credit. Is that so?

[AmyC]

Yes. The IRS defines  earned income . You can use IHSS income for child tax credit and earned income credit, if you qualify. 

Traditionally, if you live with the family member that you care for, you have the option to enter the income as taxable. So IHSS has long been available as an earned income for those credits. 

There was a court case and the IHSS is allowed for these credits as earned income. For more info and entry, click here.

@Beattitude

[Beattitude]

So I enter it under Miscellaneous Income, Other Earned Income, "Medicaid waiver for IHSS" under description?

[JamesG1]

In TurboTax Online, report 'difficulty of care' income on form 1040 line 1 as a positive number and line 8 as a negative number.  This gives you credit for earned income yet reduces your taxable income and explains why the income is not taxable.

• Go to Federal / Wages & Income / Your Income / Less Common Income / Miscellaneous Income 1099-A, 1099-C / Other income not already reported on a Form W-2 or Form 1099.
• At the screen Other Wages Received, select Yes.
• At the screen Enter Source of Other Earned Income, select Other.
• At the screen Any Other Earned Income, enter '2014-7' or similar description.
• Click Done.
• Select Other Reportable Income and select Yes.
• Enter the same description and the negative number.

@Beattitude

[bunred]

What if I already filed Federal and 1099-NEC was only entered as a zero on line 3 business income, but a form 1099-NEC Nonemployee Compensation Worksheet was generated with the Notice 2014-7  in the Schedule C line with 0.00?  What to do now? 

[JamesG1]

I think you are saying that an IRS Form 1099-NEC is reporting $0 Notice 2014-7 income.  

If you received the form(s) reporting $0 Notice 2014-7 income, has your Federal 1040 tax return been electronically filed and accepted by the IRS?

If the tax return is accepted by the IRS, retain any records of the Notice 2014-7 income should the IRS have questions about the nature of the income.

@bunred

[derouend1]

How is it entered on your tax form when box 1 on the w-2 is empty.  

[kristalvb]

Has this worked for anyone?