How and where to Post claim "IRS Notice 2014-7 excludable income"

[kristalvb]

If I file this way, husbands and my return will be larger because of EIC. Will that get flagged? I have a W2. 

What documentation do I need to provide with this? My daughter's name (who I provide services for) is on the return as well. 

I've never been a provider for her before and I'm afraid of being stuck in an audit scenario forever. 

[Steve371]

Whether you report the income as Other Income or Wages, the income is the same.  By reporting the income as wages and subtracting it in Other Income the income becomes nontaxable but counts towards earned income for the earned income and child tax credits.  Without the offset in Other Income, you may owe the social security tax.

I am not sure what this means: "If I file this way, husband's and my return will be larger because of EIC."

[kristalvb]

Filing the 2014-7 W2 on line 1 lessons the amount of the earned income credit, hence our refund would be smaller. 

If I add it under other income twice (once showing the w2 amount and second the negative amount), the EIC is larger.  I am wanting to make sure doing it the second way is accurate.

Do you also need to submit proof? If so, how do you do that on TT?

[DaveF1006]

Assuming this income is earned as a individual care provider, when you report the  negative amount, there is a space where you would indicate that this is exempt income in accordance with IRS Notice 2014-7. You do not need to submit any proof but keep your proof handy just in case if the IRS questions the reporting of this exclusion. 

@kristalvb

[Happyface201977]

Yes can still claim both of your regular W2 and file under 2014-7 income as a caregiver/ nurse. You get a lot back if daughter stays with you or responsible for her care. You won’t be flagged, now if you were paying taxes as you receive your income and your daughter lived with you, you should be under tax exempt. I figured out everything on my own because Turbo agents don’t know how to file this on taxes.

[Steve371]

Know that you can't use the free version because it doesn't include Other Income.

[kdegueme]

If I follow the steps above for my federal return, does that also exclude the wages in my state return?  Or do I have to take a step to exclude it there as well?

[Steve371]

You have to check the law in your state to be sure, but it is likely exempt from state tax as well and is for sure tax-exempt if you are in one of the handful of states without a state income tax (revenue is raised through other sources, e.g: higher sales taxes and intangibles taxes).  If you call the state tax authority early in tax season, you are likely to get through quicker even if you are not prepared to start preparing your tax returns.

[cutijudi]

How do I post this on an amended return please? 

[TeresaM]

If this is for Qualified Medicaid waiver payments on a Form W-2 and the wages were included in Box 1, first begin an amendment of your return. The IRS is not currently accepting amendments for tax year 2022 but when they are available, you may amend your TurboTax return at no additional charge. 
If you need to amend a prior year return, the directions to open the amendment are in this TurboTax Help file. 
 

Then follow the directions in this TurboTax Help article to enter the 2014-7 adjustment. It also include additional information links on the IRS website. It will adjust your taxable gross income but still allow it to be counted for the Earned Income Credit. 
 

[rpswartz]

Same here.  The post above mine doesn't discuss about 1099.

[CarissaM]

How can we assist @rpswartz ? 

[oodonnaoo]

The problem is that the form will not let you have a negative number in that area for 2019, 2020, and 2021... because of turbotax I have over paid since I started working for my daughter in 2018. Thousands of dollars! I have spent 3 days on the phone with live support that I had to pay $90 for and they couldn't solve this glitch!!! I can only go back to 2019 so I payed several thousand dollars over in 2018 that I can no longer get back!!! No help!!!

[CatinaT1]

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.   

   

Since you do not have a W2 and want to use this income to qualify for earned income, here is how you will enter it:   

1. Click on Wages and Income at the top of the screen 
2. Scroll down to "Less Common Income";   
3. click on Show More;  
4. click on Start or Revisit next to Miscellaneous Income, 1099-A, 1099-C;  
5. click on Start or Revisit next to Other income not already reported on a Form W-2 or Form 1099;  
6. Did you receive other wages? Say yes;  
7. Wages earned as a household employee, leave blank and click continue;  
8. Sick or disability pay, leave blank and click continue;   
9. The next question asks about non-taxable Medicaid waiver payments; enter the amount here,  
10. Click Continue.   

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

@rpswartz 

[ShirTK]

When did 2014-7 start ??  So I can know how far back to amend my taxes