What's the meaning of this on the www.cdss.ca.gov you have the option to include or exclude all or none of that income as earned income on your tax return.

[Rider2]

Trying figure out how to file online instead of mail-in while I have a couple of W2s from IHSS with 0 on box 1 and box 2. Turbotax says I can't file online and have to mail-in because there are W2s with 0 in box 1. I have other non-IHSS W2s, which won't qualify me for any low income tax breaks such as CalEITC, etc., so I just want to file online and be done with it.

I came across this article on California Department of Social Services saying "you have the option to include or exclude all or none of that income as earned income on your tax return." Does it mean that I can just delete those IHSS W2s with 0 in box 1 and 2 and file my return?

[KrisD15]

Yes, IHSS is not taxable and needn't be entered HOWEVER it CAN be used to get a better Earned Income Credit on your Federal or CA return.  

If it does increase your Earned Income Credit, you must claim ALL of it, so you can't decide to report only a portion of the income. It's all or none. 

They are not supposed to be using a W-2 for reporting that income.

If you decide to enter the income, this is how you do that in TurboTax:

Entering into TurboTax is a bit confusing so please follow these steps carefully. 

Sign into TurboTax and continue through until you can start selecting "Wages & Income" located at the top of the screen

Click on Wages & Income

Select answers to the questions which follow if necessary to move forward

Click Add more income 

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 

On this new drop-down list scroll to the VERY FIRST option "Other income not already reported on a Form W-2 or Form 1099"

Click START

Select YES to the page titled "Other Wages Received" and Continue

 Select CONTINUE on the "Wages earned as a Household Employee" screen (enter nothing here)

 Select CONTINUE on the "Sick or Disability Pay" screen (enter nothing here)

Select "Yes" on the "Any Other Earned Income" screen and continue

 Select "Other" on the "Enter Source of Other Earned Income" and Continue

In Description Box type "Qualified Medicaid Waiver Pay" and the amount

(NOTE- YOU MUST ENTER ALL THE INCOME OR NONE)

Click Done 

This will put the income on your 1040 line 1 where it needs to be. 

 Next, you need to make an entry so that TurboTax will make the income exempt from tax. 

(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) 

(you will be repeating some steps, but not all)

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 REVISIT

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

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

Type "Tax Exempt Income on line 1" and the same amount you entered before but as a NEGATIVE (put a minus sign - in front of the number) 

This NEGATIVE number should show on your 1040 line 8 

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

EIC is on Line 27

[Rider2]

Thanks for the detailed steps. right now I have all the IHSS W2's added in the Wages & Income section, and that basically is not letting me file online. We have 5 of them in the household and all are 0 in box 1 and 2. So can I just remove them all and if my return amount doesn't change, just move forward and file without those W2?

[ThomasM125]

You should be OK to exclude the W-2's from your tax return since they don't report any taxable income, so the IRS will not be able to assess any additional tax by adding unreported income to your tax return.

[Rider2]

This weird thing happened that when I removed all the IHSS W2s (which all have $0 in box 1 and 2), my CA return stayed the same, but my federal return reduced by $2000. Any thoughts?

[CatinaT1]

The entry for IHHS income changed this year. You will enter your W2, even though it shows $0 in box 1. This will also allow you to claim earned income credit in California.

TurboTax can exempt income under Notice 2014-7 per the IRS instructions. This Notice provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program, are difficulty of care payments and excludable as income. You can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable. 

   

This is how you will enter your W2:

1. Sign into TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer); 
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);  
4. click on Add a W-2; and enter the information as reported on your W-2. 
5. After you have entered all your W-2s, you will see a screen that looks like this, asking for uncommon situations. Make sure you check the box for Nontaxable Medicaid waiver payments.  

 

You will then get to choose if you want to include the income for Earned Income Credit or not. 

For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs. 

[Rider2]

I did that for all the IHSS W2s with 0 in the box 1 and 2, but still get the error about the 0 in box one and can't file it online. I made sure for each W2, to put the same amount as box 3 or 5 (which are the same), in the box asking for Enter the total amount of difficulty of care payments you received from. But still for this error. Am I doing something wrong?

[CarissaM]

It would be best to delete the W2 by following the instructions here, and re-entering the W2. 

Please let us know if we can further assist you. @Rider2 

[Rider2]

I deleted all the IHSS W2's and readded them but still get the same error. 

[HopeS]

One of your W-2s does have an amount in Box 1 or the amount is less than $1. You should not have a blank W-2 or W-2 with less than $1 in box 1.

Therefore, follow the steps below to fix your W-2:

In TurboTax Online or CD/Download:

1. Open or continue your return.
2. From the menu, select Search and type in W-2.
3. Select the Jump to link in the search results.
4. On the Your W-2 info so far screen, select Edit next to the W-2 you want to change.
5. Select the trash can Delete icon to delete the W-2.

Review the link below as well for more information:

How to Change W-2

Once you remove, clear your Cache before logging back in and reenter the W-2.

How to Clear Cache

@Rider2 

[Rider2]

I have IHSS W2's that have 0 in box 1 and 2, since it was issued to live-in provider. If I remove them, my refund will be significantly reduced. 

[CatinaT1]

I can only think that something is hung up in your return based on the original entries. It looks like you are using the online version. Have you cleared your cache and cookies? I would try that, and another option is to use a different browser. 

There are no other reasons you would get this error if you have entered everything as suggested. Please let me know if this works for you.

How to clear your cache

[Rider2]

I tried on my phone Chrome and also the mobile app and still got the same error. Help please 🙏 

[Rider2]

@CatinaT1 I just removed all the IHSS W2s and proceeded to the Review section and it didn't give me any errors, but when I went back and added only one of the IHSS W2s that has 0 in the box 1, and went to Review, I got the error again. Not sure what's happening now 😥

[Rider2]

Ok for some reason it quit giving me the error.