The I need file tax
My husband and me have a lot of Medicaid Waiver Payments from maryland DDA in 2023. We need to clarify this income in tax return. However it is qualified Excludable From Income. Could FreeTaxUSA finish this kind of works in Tax return in 2023?
Answers
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Hello luoyining88,
Are you wanting to include those Medicaid Waiver Payments as earned income? If you received Medicaid Waiver Payments, you can choose whether to include that amount in your earned income by selecting “Income” > “Other Income” in our software. There’s a section that specifically asks what Medicaid Waiver Payments you received and if you’d like to include them as earned income or not.
Choosing to include nontaxable Medicaid waiver payments may increase or decrease your Earned Income Credit if you qualify for it, which could increase your refund or decrease the amount of tax you owe. You may want to try including it as earned income or excluding it to see which option gives you the best tax benefit.Please note, you would also enter the income in the “Income” > “Wages (W-2)” if it was reported to you on a W-2.
I hope that helps answer your question!
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Thank you for your reply. I found "Medicaid Waiver Payments to Care Provider" but this item means that you want this non taxed income included into your income. If I do not want this non taxed income included my tax income, Could I not claim this income in my tax return? If I must to claim this non taxed income, which section I should put this in your software. Thank you.
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That section can be a bit confusing, but I can assure you, that is the correct location. I’ll clarify with some examples.
When you select “Income” > “Other Income” and answer “Yes” to the question “Do you have tax-exempt Medicaid waiver payments (Notice 2014-7)?” more questions will populate below. These questions allow you to treat the income as non-taxable and determine whether you’d like it to be included as earned income.
For example, if I received $10,000 of qualifying Medicaid waiver payments and entered that information as listed on my W-2 in the “Income” > “Wages (W-2)” section, it would first show as taxable income on my tax return.
From there, I could select “Income” > “Other Income” and indicate that I have tax exempt Medicaid waiver payments. The software then has a section that says:
“Enter your nontaxable Medicaid waiver payments from W-2s:”
If I enter $10,000 in that box per our example and save, an adjustment is added to the tax return so the $10,000 is not considered taxable.
The next question asks whether I would like to treat those payments as earned income. Please note that choosing to include Medicaid waiver payments in your earned income will not include them in taxable income. Entering the payments here can potentially be beneficial to qualifying for certain credits. It does not make the payments taxable.
You’ve also asked “Could I not claim this income on my tax return?” If the income was reported on a W-2, you would follow the example above to enter it in the W-2 section and adjust it off in the “Other Income” section. If you don't receive a W-2 for these payments, yes you can exclude it by not entering it. You could still choose to include it as earned income (not taxable) by entering the amount in the final section of the Medicaid waiver questions. It says:
“Enter your nontaxable Medicaid waiver payments NOT included on W-2s that you'd like to include in earned income:”
Again, entering an amount here would not make the income taxable. It would simply count as earned income that may or may not be beneficial for certain credits such as the Earned Income Tax Credit.
In summary, if the payments are reported on a W-2, enter the W-2 normally and make it non-taxable in the “Income” > “Other Income” section. If not reported on a W-2, you do not enter the income anywhere. In either case, you can choose to treat the income as earned income in the “Income” > “Other Income” section.
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Thank you for your reply. I chose the "Yes" there is no "more questions will populate below", however it is show below "The amount of Zhong's earned income could affect various credits. You can try both including and not including Zhong's Medicaid waiver payments and see which one gives you the greater tax benefit. Choosing to include Medicaid waiver payments in earned income will not include them in taxable income".
The other question that I have 1099 form medicaid waiver income, should I put 1099 income together to this non-taxable in the “Income” > “Other Income” ?
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If you have multiple 1099 forms, you will enter the total for each taxpayer in the "Other Income " section as directed by the software.
When you select "Yes" to having tax-exempt Medicaid waiver payments, fields will open up for each taxpayer listed on the return. If you are filing jointly, there will be a field to enter the total payments for both you and your spouse.
These payments will then be included as earned income for applicable tax credits. The amount of earned income can affect various credits. You can try both including and not including these payments to see which option gives you the best outcome. Including these payments as earned income will not include them as taxable.1 -
Thank you for your answer.😀
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Question: About Medicaid waiver payments. Can I include part of the tax-exempt Medicaid waiver payments but not all? If I must consist of all of them, can a credit be achieved as a deduction for providing adult care expenses?
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I located the following on the IRS website, that you may chose to include all or none, of the tax-exempt Medicaid Waiver payments. Please see
Q9. I received payments described in Notice 2014-7 that are treated as difficulty of care payments under § 131. May I choose to include these payments in earned income for purposes of the earned income credit (EIC) or the additional child tax credit (ACTC)? (added May 8, 2020)
A9. Yes, for open tax years, you may choose to include all, but not part, of these payments in earned income for determining the EIC or the ACTC, if these payments are otherwise earned income (wages or income from self-employment).
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Are you saying NOT to include 1099s issued for DIFFICULTY OF CARE payments under schedule C or “anywhere”? That can’t be right.
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I believe you have to include them in one part, and with the check boxes, you can exclude it for tax purposes if eligible. I think you are asking a different question, because yours are 1099's for different recipients of care that you are not the live-in provider for. Thanks, WEJR
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Hello Shubbywax,
RyanZ is referring to including Medicaid Waiver payments as earned income on your return so as to influence eligibility for the Earned Income Tax Credit, not for whether you include the payments on your return at all.
You can choose whether or not you want to include the payments as earned income, but you must choose to include all the payments or none of them, and cannot choose to include just a portion.0 -
I understand that but the software checkboxes/ fields related to notice 2014-7 appear to say “you can’t include more than is on w2” and a lot of states use 10-99s. In any case, I filed without entering my 10-99 or claiming it for the earned income tax credit. I did check a box saying I had received waiver payments. I guess the IRs will get my 100-99 from agency and see my having checked that box and be satisfied.
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Hi Shubbywax,
Thank you for your posts in the community about the Medicaid Waiver Payments (2024-7). Although we may not have full support when the payment is reported on a 1099, we can generally find a work around. Have you checked with the State agency who issued the 1099 if they have instruction for reporting the income on a tax return so that it is excluded.
Here is an option from the IRS, see Q14:
When the income is reported on a 1099-NEC it must be reported on a Schedule C, but then "You should then report the nontaxable and excludable amount as an expense in Part V, Other Expenses, and write "Notice 2014-7" next to that amount."
That way not self-employment tax is not calculated on the income, and the 1099-NEC is reported properly on a Schedule C.
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Hi. When I add the 1099 and then deduct that amount from the expenses and label it as you say, I don’t have any way to still not include that on my income. My tax return goes down to zero. No the company that sent me a check will not help me. They said they’re not tax professionals.
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