I work for IHSS and live with my client ( same as last year) but turbo tax is not accepting my w2 for efile this year. ( I was able to last year.) Why?

[BarbaraW22]

You can’t e-file your tax return if it shows $0 in income. Since In-Home Supportive Services are not considered taxable income, if that is your only income, you may not be able to e-file your return. You may need to print and mail your return.

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. Even though these payments are specifically excluded from income, in a recent court case, it was ruled that Medicaid Waiver Payments are considered "earned income" for purposes of calculating the earned income tax credit. A taxpayer can choose to include Medicaid Waiver Payments as Wages on line 1 of Form 1040 (even if not reported on a W-2) in order to claim the credit. Then an adjustment is entered on Schedule 1, line 8 so the payments are not included in taxable income. Please see the steps below:

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. Click Edit/Add next to Job (W-2) and then click on Add a W-2
4. If you received a W-2 for your Medicaid Waiver Payments, enter the information as reported on your W-2. Enter the amount you received for Medicaid Waiver 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 Medicaid Waiver Payments in Box 1 for the purpose of claiming the credit.
5. Continue through the screens until you get back to "Wages and Income" section and then scroll down to Less Common Income and click on Show More
6. Click on Start or Revisit next to Miscellaneous Income and then click on Start next to Other Reportable Income and select "Yes"
7. 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 Medicaid Waiver Payments) as a negative (-) number

NOTE: This will both show the W-2 on your return and explain why it is not taxable.

[Edited 02/11/20 | 5:54pm PST]

[Nero1]

I have Federal income tax, social security tax, and Medicare tax withheld on my W2 for my IHSS job. 
I live with the recipient. How do I enter the withholdings? Please give clear step-by-step directions. 

Also, can anyone explain more about EIC/EITC? What does that have to do with Medicare waiver - is there another name for that? Who qualifies? How can we claim EIC/EITC on our return?

Also, others who entered withholding info said they weren't able to file the state/CA return through Turbo Tax. So do we need to file it on the CA/FTB site? Is that complicated? It's free, right? What if the CA refund on the FTB site isn't the same as what it is on Turbo Tax?

[DawnC]

Please see this discussion which explains your situation.  

And here is what you need to know about Earned Income Credit (EIC).  There is a video and explanation in that link.  

Regarding the state of California, please see this discussion.    @Nero1

[PonderingSW]

If I have other income from a part time job and it is enough to get the earned income credit do I still need to show the income from my IHSS that I have filed for SOC 2298 for and don't get a W-2 for?

[alexlovesmom1]

This part is a bit complicated to file.  Thanks for the tip.  Is any way Turbo Tax can make it a easier step?  Taxslate shows a box to check for Medicare Waiver of payment.  And that was all we need to is to check the box.

[mamadabear]

I am having this issue, did you ever figure out how to file state taxes? My situation is the same as yours. I am the provider for my child whom lives in my home. Federal taxes are withheld on my w2 and I have reported income. 

I am having the most difficult time finding any information on how to file state taxes with ihss income. All information given here in every thread I've come across only gives information on filing a federal return. 

Any help or experience with what has worked is greatly appreciated.

Thank you

[PattiF]

From @MarilynG:

You won't need to exempt your IHSS income on your State taxes if you did so on your Federal return.

The State normally starts their calculations with the bottom line from your Federal return, so the income has already been exempted.