IHSS Tax Exempt - Can't E-file with W2 having $0 in Box 1

[henrysf]

@Kupe Did you print and mail both federal and state return?

[Kevin5473]

I did electrically file my tax return.

[ssolieman]

I am seeing that regardless of following the proper steps of checking the Nontaxable Medicaid waiver payments under uncommon situations - turbo tax still at the very end does not permit a $0 wage box 1 w-2 to e-file. 

What is the solution here?

@CatinaT1 

[MonikaK1]

The help article for this issue was recently updated again. We are finding this year that different counties / payers are identifying the IHSS / difficulty of care income differently.

Many Forms W-2 issued for IHSS - IRS Notice 2014-7 income now show zero in Box 1, to indicate that it isn't subject to Federal income tax, but show the entire amount of wages paid in Box 3, Social Security wages. If you have an amount in Box 3, and you might qualify for Earned Income Credit or Additional Child Tax Credit, follow the instructions in this help article, which were recently updated:

1. Sign in to TurboTax and open your return.
2. Select Search, enter w-2, and select Jump to w-2.
3. Enter all your W-2 info as shown on your form, except Box 1 (this is assuming that the W-2 Box 1 is blank or zero).
4. Enter the amount reported in box 3 of your W-2 in Box 1.
5. On the Let’s check for uncommon situations screen, select the box next to Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.
6. Enter the amount of Medicaid waiver payments into the difficulty of care payment you received from IHHS box.
   • This is the same amount reported in boxes 3 and 5 of your W-2.
   • Your payments are nontaxable, but TurboTax uses this number to calculate credits you may qualify for.
7. When you get to the Earned Income Credit section in Deductions and Credits, we’ll ask if you want to add your Medicaid waiver payment to your income for this credit. You can answer based on what benefits you most.

If you follow these steps, you are entering income and then backing out the income, so that it isn't backed out twice, and so that you are not entering a zero in Box 1 which may prevent e-filing.

If you don't have any dollar amounts on your W-2, you qualify to exclude the income under IRS Notice 2014-7, and you don't expect to qualify for Earned Income Credit or Additional Child Tax Credit, then you don't need to enter the W-2 at all.

[ssolieman]

I do not understand what you meant by "If you don't have any dollar amounts on your W-2, you qualify to exclude the income under IRS Notice 2014-7" Did you mean if you have dollar amounts on your w-2 you qualify to exclude the income under IRS Notice 2014-7?

In my situation, I have dollar amounts on W-2 (box 3-6) and do not qualify for Earned Income Credit or Additional Child Tax Credit.

[MonikaK1]

If:

• you don't have any dollar amounts on your W-2, 
• you qualify to exclude the income under IRS Notice 2014-7, and
• you don't expect to qualify for Earned Income Credit or Additional Child Tax Credit, then you don't need to enter the W-2 at all.

If your IHSS W-2 has a zero in Box 1, but you do have a  dollar amount in Box 3, Social Security Wages, then you can enter the W-2 following the instructions in the revised help article:

1. Sign in to TurboTax and open your return.
2. Select Search, enter w-2, and select Jump to w-2.
3. Enter all your W-2 info as shown on your form, except Box 1 (this is assuming that the W-2 Box 1 is blank or zero).
4. Enter the amount reported in box 3 of your W-2 in Box 1.
5. On the Let’s check for uncommon situations screen, select the box next to Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.
6. Enter the amount of Medicaid waiver payments into the difficulty of care payment you received from IHHS box.
   • This is the same amount reported in boxes 3 and 5 of your W-2.
   • Your payments are nontaxable, but TurboTax uses this number to calculate credits you may qualify for.
7. When you get to the Earned Income Credit section in Deductions and Credits, we’ll ask if you want to add your Medicaid waiver payment to your income for this credit. You can answer based on what benefits you most.

[ssolieman]

In the case of W-2 has a zero in Box 1 but has a dollar amount in Box 3:

You've restated the steps to follow that lead to my initial inquiry which is:

I am seeing that regardless of following the proper steps of checking the uncommon situation - Nontaxable Medicaid waiver payments under uncommon situations - turbo tax still at the very end does not permit a $0 wage box 1 w-2 to e-file. 

Is this a bug in the system or is what you're suggesting just not the correct step to follow?

[MarilynG1]

Enter the amount shown in Box 3 of your W-2 into Box 1 in TurboTax, as @MonikaK1 stated above, and you should be able to Efile.

@ssolieman 

[ssolieman]

Was able to e-file by putting box 3 amount in box 1 and checking the suggested uncommon situation as described above. 

Steps also described here: https://ttlc.intuit.com/turbotax-support/en-us/help-article/form-w-2/qualified-medicaid-waiver-payme...

Thanks

[de123]

What if you have a dollar amount () in BOX #1 (not $0.00) that doesn't match BOXES #3 and #5?  

[DawnC]

That is okay.   Enter your w-2 exactly how you see it.   @de123   There will be a follow-up screen after you enter it where you will mark that this is IHHS income.  

[de123]

I selected the "Nontaxable Medicaid waiver" option. This pops up next:

Let's check your Medicaid waiver payments

We need a little more info about any Medicaid waiver payments that qualify as difficulty of care payments.

How much of the $XXXX in box 1 is difficulty of care payments?" The options are: All of it, some of it, or none of it.I am confused what to put.

[DawnC]

Was the entire W-2 for Medicaid waiver payments?   If so, select all of it.   If you select some of it, you will be asked to enter the portion that qualifies as medicare waiver payments.   Basically, if you provided the care to the patient in your home, it counts as medicare waiver payments.    More FAQs on this topic

Section 1915(c) enables individuals who otherwise would require care in a hospital, nursing facility, or intermediate care facility to receive care in the individual care provider's home.  The notice provides that the Service will treat these Medicaid waiver payments as difficulty of care payments excludable from gross income under § 131 of the Internal Revenue Code.   @de123

[de123]

Was the entire W-2 for Medicaid waiver payments?  

I submitted the live-in certification because this client is my mother, who lives with me. Box 1 has a smaller amount than Boxes 3 and 5, Box 2 has $0. I think it may be because I didn't submit the live-in certification from the start, so part of my total wages will be taxed?

As for :

If so, select all of it.   If you select some of it, you will be asked to enter the portion that qualifies as medicare waiver payments.   Basically, if you provided the care to the patient in your home, it counts as medicare waiver payments.  I don't understand what to select as a result. 

I read this on IHSS website: 

"What Do I Do For Wages Paid Before My Self-Certification Form Is Received?
Your W-2 Form for past year wages paid prior to 2017, or for 2017 wages paid prior to the receipt and processing of your Self-Certification form will not be amended. Providers are encouraged to consult with a tax advisor or contact the IRS directly with questions."

Section 1915(c) enables individuals who otherwise would require care in a hospital, nursing facility, or intermediate care facility to receive care in the individual care provider's home.  The notice provides that the Service will treat these Medicaid waiver payments as difficulty of care payments excludable from gross income under § 131 of the Internal Revenue Code.   @de123

[AmyC]

The box1wages are from before the certification. Since all of it is related to the Medicaid Waiver, you can select all of it. This will make the wages nontaxable.

On the other hand, you can choose to include the income as taxable wages in order to qualify for other credits.  You can use IHSS income for child tax credit and earned income credit, if you qualify. 

Reference:

How to enter IHSS payment

@de123