Notice 2014-7: “provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid Waiver) program, described in this notice, are difficulty of care payments excludable under § 131 of the Internal Revenue Code.
For more information, visit the IRS website.
Reporting:
Medicaid Waiver Payments reported on W-2 in Box 1
This income is excludable on your return but can be used to calculate Earned Income Credit.
If you have a W-2 that doesn't have your Medicaid Waiver payments listed in box 12 with code II, you will need to report this, by going to:
- Federal Section
- Income (Select My Forms)
- W-2
- Enter your income in the box labeled Medicaid Waiver Payment
Note that if box 1 is blank, enter the Medicaid Waiver Payment in box 1.
Medicaid Waiver Payments reported on W-2 in Box 12 (Code II)
If your W-2 reports your Medicaid Waiver payments with box 12 code II, you do not need to use the instructions above. Simply select II from the box 12 dropdown menu and enter the amount.
Medicaid Waiver Payments not reported on a W-2
In the case where you do not have a W-2 form, you can report the income as follows:
- Income
- Less Common Income
- Other Compensation
- Medicaid Waiver Payments (Not Reported on W-2)
How to include the Medicaid payments in the Earned Income Tax Credit calculation
On the W-2 entry, check the box that states "Select if you want to include Medicaid Waiver payments in the calculation of earned income." (under box 14).
Additional Information:
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