Difficulty of Care payment amount not included in line 1 of W-2-How do you e-file?

[monicac]

ProSeries Basis will not let me e-file because line 1 of the  Difficulty of Care payment W-2 is zero.

If I put the amount of social security wages on line 1 (wages) and then remove it by putting it on line K.b. (Box 1 wages include amounts excludable as difficulty of care payments) that will allow me to e-file it.

My question is, will this generate a letter from the IRS because the amount of wages on the actual W-2 is zero?

[IRonMaN · Accepted solution]

If it doesn't affect anything else on the return, ignore the W-2.  If it affects something, put a 1 in the wages box.

[Just-Lisa-Now-]

You dont include that W2. 

If that income would help them qualify for EITC, you can enter it on the EIC worksheet, theres a line for it.

[sjrcpa]

@Just-Lisa-Now- Since you mentioned it. I've been meaning to ask:

Can you use the excluded difficulty of care wages for EIC? Even tho they're not taxable?

I only have 2 returns with difficulty of care payments.

This year one of those is eligible for EIC, even without considering this income. 

Excuse my ignorance but I rarely see EIC returns.

[Just-Lisa-Now-]

Yes, the EIC worksheet has a spot to include the excluded wages for EITC purposes.  But I think using the new boxes at the bottom of the W2 will do it for you.

All my people with this make too much for EITC, with or without the difficulty of care income.

[sjrcpa]

Thanks. It looked like this was the case but I'm very cautious when I see EIC. I hadn't researched it yet.

[itonewbie]

@sjrcpa Perhaps you like this bedtime story from the IRS and USTC?  Could help you sleep better at night. 😉

https://www.irs.gov/pub/irs-aod/aod-2020-02.pdf

[TaxGuyBill]

I thought that court case was interesting because even though the court did not rule on this, I read that the 'tone' seemed to indicate they disagreed with the 2014-7 and it being not taxable.

[sjrcpa]

 Thanks Jensen. Offline, one of our friends sent me that, too.

[monicac]

It sounds like the courts agreed with the taxpayer and allowed them to use the excludable income as earned income for the purposes of the ACTC. However the document says "THIS DOCUMENT IS NOT TO BE RELIED UPON OR OTHERWISE CITED AS PRECEDENT BY TAXPAYERS" and ProSeries Basic will not use it to calculate the credit. 

Is there a workaround?

[TaxGuyBill]

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@monicac wrote:

 ProSeries Basic will not use it to calculate the credit. 

Is there a workaround?

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Go back to your W-2 worksheet and scroll almost to the bottom.  Fill out the appropriate boxes in Part VI.

Then go to the "Find Form" (or Control-F) and type "earned".  Open the "Earned Inc Wks" and check the boxes on top.

[monicac]

That did the trick! Thank you so much!!