Reporting non-taxable income

[kamaaina1]

how to submit 1040 schedule 1

[macuser_22]

What type of non-taxable income?    What form is it reported to you on?

[kamaaina1]

Reported on W-2.  My wife is a individual provider which income is non-taxable.  I believe I'm suppose to enter amount on 1040, and schedule 1, then duduct on line eight.  Can't find chedule 1 on turbotax.

  Thank you!

[kamaaina1]

More info:

IRS Notice 2014-7, Difficulty of Care Payments Excludable from Income

If you are an Individual Provider who lives with your client, the income you earn for providing care services can be excluded from your federal income taxes.

Individual Providers are eligible for the Difficulty of Care income exclusion if the Provider lives with the DSHS client in the same household. This means that the wages earned by an IP for providing personal care to a DSHS client who they live with are excluded from the IP’s income for income tax purposes.

The Difficulty of Care income exclusion applies only to personal care services and relief care,[1] which are listed separately on year end W2 earning statements.  The exclusion does not apply to payments made for respite care[2], skills acquisition training, travel time, required trainings, or paid time off.  The exclusion does not apply to payments you receive directly from your clients, which are known as “client participation” amounts. 

[macuser_22]

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@kamaaina1 wrote:

More info:

IRS Notice 2014-7, Difficulty of Care Payments Excludable from Income

If you are an Individual Provider who lives with your client, the income you earn for providing care services can be excluded from your federal income taxes.

Individual Providers are eligible for the Difficulty of Care income exclusion if the Provider lives with the DSHS client in the same household. This means that the wages earned by an IP for providing personal care to a DSHS client who they live with are excluded from the IP’s income for income tax purposes.

The Difficulty of Care income exclusion applies only to personal care services and relief care,[1] which are listed separately on year end W2 earning statements.  The exclusion does not apply to payments made for respite care[2], skills acquisition training, travel time, required trainings, or paid time off.  The exclusion does not apply to payments you receive directly from your clients, which are known as “client participation” amounts. 

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If you qualify then you simply do not enter the income at all since it is "excluded".

[kamaaina1]

Tried that the last two tax years.  No-go.  Got called out by the IRS for missing income.  Finally worked it out through snail-mail with IRS with paid CPA advice. 

  A11. You should include the full amount of the payments reported in box 1 of Form W-2 as wages on line 1 of Form 1040 or Form 1040-SR. You should then subtract the excludable portion of the amount in box 1 on Schedule 1, line 8, “Other income,” of Form 1040 or Form 1040-SR. If you have other income reportable on Schedule 1, line 8, you should enter the net amount after subtracting the amount excludable from gross income under Notice 2014-7 from the other amounts reportable on Schedule 1, line 8. You may need to enter a negative amount on Schedule 1, line 8, if you have no other income reportable on Schedule 1, line 8, or if the amount of other income you must report on Schedule 1, line 8 is less than the amount excludable from gross income. You should write “Notice 2014-7” on the dotted line for Schedule 1, line 8, if you file a paper return, or enter “Notice 2014-7” on Schedule 1, line 8 for an electronically filed return.

[DanielV01]

@kamaaina1 If you follow the instructions in the following link, the Schedule 1 will print automatically:  Regarding Medicaid Waiver Payment 2014-7 and Earne...

[rakwelk]

Difficulty of Care Income reported on W2, and trying to enter into IRS Notice 2014-7

[KrisD15]

Notice 2014-7 made Difficulty of Care payments eligible to be treated as Earned Income for certain credits.

Difficulty of Care payments are not normally reported on a W2. 

If you were able to enter the W2 into the TurboTax program, here is how to make it tax exempt. 

(NOTE- AT THIS POINT, YOU MAY NOT OWE ANY TAX ON THE INCOME AND YOU MAY ALREADY HAVE THE EIC CREDIT INCLUDED IN YOUR REFUND, THEREFORE THE NEXT STEPS MAY OR MAY NOT CHANGE THE FEDERAL REFUND METER ON TOP OF THE TURBOTAX SCREEN) 

 Go back to the Wages & Income section

 Scroll down to the VERY LAST option "Less Common Income" and click Show more

On this new drop-down list scroll down to the VERY LAST option "Miscellaneous Income" and click START

Now scroll down to the VERY LAST option "Other reportable income" and click Start

Select YES on the "Any Other Taxable Income?" screen 

Type "Notice 2014-7" and the same amount you entered before but as a NEGATIVE (put - in front of the number) 

This NEGATIVE number should show on your 1040 line 8 

 Go through the return and answer any questions regarding the EIC and any other credits you may be eligible for if necessary.

 TO CHECK IN TURBOTAX ONLINE:

Click "Tax Tools" on the LEFT SIDE BAR then click "Tools" that open below 

Click "View Tax Summary" on the screen

Click "Preview my 1040" which now appears on the LEFT SIDE BAR

Scroll through the 1040. 

The amount of income should be on line 1

The adjustment (negative) should be on line 8

[walkerute]

where do i report non-taxable income in turbo. what form? veteran disability

[KrisD15]

Veteran Disability is not taxed and does NOT need to be reported on your tax return. 

The only time you might want to "use" non-taxable income, and enter it into the TurboTax program is if you were claiming Sales Tax and that would be very uncommon. 

In that situation, it is asked for in the Sales Tax interview under Deductions & Credits "Sales Tax". 

@walkerute