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Is this saying that income excluded per IRS Notice 2014-7 (MedicAid waiver) can still be used in the EIC calculation?

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Level 15
Level 15

https://www.caltax.com/news/hot-news-and-notes/ihss-payments-are-earned-income-for-earned-income-tax...

I haven't had any of these clients with 2014-7 excludable wages that qualified for EIC, but I know its been discussed how to back those wages out from the EIC calculation.

Looks like some preparers have some amending to do and some clients get some additional $$ !


♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 12

I would recommend waiting a bit to see what the IRS says about it.

Maybe I'm reading too much into it, but I get the impression that the Tax Court disagreed that 2014-7 should even exclude those wages in the first place (but it did not make a ruling about that).

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Level 12

I would recommend waiting a bit to see what the IRS says about it.

Maybe I'm reading too much into it, but I get the impression that the Tax Court disagreed that 2014-7 should even exclude those wages in the first place (but it did not make a ruling about that).

View solution in original post

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Level 1

Just did a return for a client with the waiver that qualifies for EIC but Lacerte is using all of the income to calculate the EIC credit. Example Client had $44000 of income, $15000 of Medicaid waiver income included in that amount. EIC is using all $44000 of income to calculate the credit not the $29,000. This makes about a $2000 difference in the credit. Is this correct?

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Level 12

The instructions seem to indicate you can "choose" to include it if you want.  So you can pick the way that has the best results.   😁

 

Certain Medicaid waiver payments you received for caring for someone living in your home with you may be nontaxable. If these payments were reported to you in box 1 of Form(s) W-2, include the amount on Form 1040 or 1040-SR, line 1. Also, include on line 1 any Medicaid waiver payments you received that you choose to include in earned income for purposes of claiming a credit or other tax benefit, even if you did not receive a Form W-2 reporting these payments. On line 8, subtract the nontaxable amount of the payments from any income on line 8 and enter the result. If the result is less than zero, enter it in parentheses. Enter “Notice 2014-7” and the nontaxable amount on the dotted line next to line 8. For more information about these payments, see Pub. 525.

https://www.irs.gov/instructions/i1040gi#idm139798474130992

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Level 1

Hello, I have the same problem too. When I browse the Pub 596, the wording is very confusing under "Figuring Earned Income". 

Certain Medicaid waiver payments may be excluded from income under
Notice 2014-7. You may include these payments in
earned income if you benefit from the inclusion. For
more information about these payments, see Pub. 525.

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Level 8

In some cases, yes!

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