IHSS and CHILD TAX CREDIT

[sid1024]

I have a client that needs me to file their 2021 through 2023 tax returns. She is a single mother and 100% of her income is excludable per 2014–7. It's all IHSS income. She indicated that she always qualifies for the child tax credit with the internal revenue service. I just don't see how that's possible. I know for the state of California I am able to add income back to qualify for the California child tax credit. However I just need clarification on the child tax credit With the IRS.  She had $56,000 in income which was reported on the W-2 which I will be excluding. That is only income that she had. Sorry to be redundant. Just trying to get more information out there to get a better answer.

[TaxGuyBill]

She does qualify for the Child Tax Credit (and potentially the Earned Income Credit).  A court case clearly says the IRS doesn't have the authority to remove the credit that law provides (and strongly hinted they didn't have the authority to make the IHSS non-taxable, but they did not rule on that).

It is a bit tricky for how to figure out how to do it on ProSeries.  I don't have my program open now so I can't give you specific directions, but I think you start on an Earned Income Worksheet and then to odd Child Tax worksheet.

If you can't find it and nobody else gives the answer, post back again in a day or two and I'll look at how to do it.

[sid1024]

Spoiler

Thank you very much

[BobKamman]

She always gets the credit, but she hasn't filed for three years?  Too busy taking care of the MediCal patient, I suppose.  There is this FAQ from IRS, but @TaxGuyBill may have a better answer if there are cases where the credit is allowed even if the income is not taxed.

Q9. I received payments described in Notice 2014-7 that are treated as difficulty of care payments under Section 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).

https://www.irs.gov/individuals/certain-medicaid-waiver-payments-may-be-excludable-from-income

[BobKamman]

Here's the case that deals with EIC and refundable child tax credit.

https://casetext.com/case/feigh-v-commr 

[sid1024]

Hello there thank you for the reply. Are you able to assist in getting through the process through ProSeries to get the client the credit?

[TaxGuyBill]

It looks like it is all combined in one easy check-box now.

Go to the "Find Forms" and type EARN.  Open the Earned Inc Wks.

On the very top of that worksheet are checkboxes that you can elect to include the Medicaid Waiver income for purposes of the credits.