Program not calculating EIC when box 1 is 0 for IHSS wages

[Sanichi 1]

A taxpayer has chosen to include IHSS nontaxable payments in earned income to claim the EIC. Form box 1 of Form W-2 shows 0 and box 12a it shows code II with the excludable wages. The program is not calculating the EIC and it shows the income on line 1d of Form 1040. I did an earlier return with only the ACTC and had no problem. This time the program shows everything correctly and yet it doesn't calculate the EIC.

[Just-Lisa-Now-]

Scroll down the W2 worksheet to part VI, did you complete that yet?

[dd4vols]

Hey Lisa, I sent you an email....

[HOPE2]

Hi @Just-Lisa-Now- @TaxGuyBill

Am I right?

Option 1:
If we want to calculate the EITC for an IHSS recipient but their income exceeds the EITC table limits, scroll down to Part VI of the W-2 worksheet and complete it.

Option 2:
If their total income falls within the EITC table, and we want to keep IHSS income for EITC calculation so SHOULD not complete w-2 part VI instead  use Schedule 1 , enter a negative amount on line 8z to exclude from taxable income.

[Just-Lisa-Now-]

@HOPE2 

I think so.   If they have zero in Box 1 and they dont qualify for EITC, I just omit the W2.

But I just fiddled around with one of these last week that do qualify, I dont remember the exact path I took, but I was able to get it to compute the EITC.  The majority of my IHSS people that live with the person and care for them as part of the Medicare Waiver program get paid too much for EITC, so its never come up for me.

[HOPE2]

How do you determine that they live with the person? Are there ways to verify this besides looking at Form SOC 873 and W-2 box 1 would be zero and box 12 code II

[Just-Lisa-Now-]

They had to self certify with IHSS in order for them to issue the W2 that way

[HOPE2]

I have a client whose W-2 shows $12,000 in Box 1, with federal tax withheld as zero. Boxes 3 and 5 both have amounts, and the California section also shows an amount, but California tax is zero. She lives with her mom and said they live together. In this situation, I was wondering why didn’t IHSS report the $12,000 in Box 12, Code II? Can I exclude the $12,000 from income and consider it for the EITC?

[TaxGuyBill]

Fill out the part of the W-2 worksheet to exclude it from income tax.

Then click on the "Find Form" button (or Control-F on the keyboard) and type "earn" and open the "Earned Inc Wks".

On the top is Box A.  Click the checkbox to include that income for EIC calculations.

[Just-Lisa-Now-]

"In this situation, I was wondering why didn’t IHSS report the $12,000 in Box 12, Code II? Can I exclude the $12,000 from income and consider it for the EITC?"

They need to self certify with IHSS and then the W2 will come with zero in box 1 and the code II

Give them this link!  Its got a link to the self certification form they need to submit.

https://www.cdss.ca.gov/inforesources/ihss/live-in-provider-self-certification

[HOPE2]

@TaxGuyBill   : Fill out the part of the W-2 worksheet to exclude it from income tax.

Thanks, you meant part VI of W-2, if so when I fill out this part , EIC being appeared on 1040 that would be ok, but when :  

Then click on the "Find Form" button (or Control-F on the keyboard) and type "earn" and open the "Earned Inc Wks".

On the top is Box A.  Click the checkbox to include that income for EIC calculations.

The EIC disappears when I check the box A. That’s weird.

[TaxGuyBill]

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@HOPE2 wrote:

@TaxGuyBill   :

Thanks, you meant part VI of W-2, if so when I fill out this part , EIC being appeared on 1040   

the "Earned Inc Wks".

The EIC disappears when I check the box A. That’s weird.

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It depends on if that income helps with EIC or not.  The IRS allows it an an option, so choose whichever way has the best result.

[HOPE2]

Thanks @TaxGuyBill 

I’m confused about something. When, in Form W-2 Part VI, we deduct the IHSS amount from income, the EIC is automatically generated because the income falls within the EIC income table range. So why is it necessary to check Box A under “earned income weeks”?

It seems that when we check Box A, it should create an opportunity to receive the credit, but in my case it does the opposite and eliminates the EIC.

In the instruction above Box A, the intent appears to be generation of the EIC, not its elimination. I’m confused.

[TaxGuyBill]

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@HOPE2 wrote:

It seems that when we check Box A, it should create an opportunity to receive the credit, but in my case it does the opposite and eliminates the EIC.

In the instruction above Box A, the intent appears to be generation of the EIC, not its elimination. I’m confused.

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Do they have other income?

At first glance, it seems like they have other income that qualifies for EIC.  If you choose to add-in the Medicaid Waiver income, it seems that income is too high to qualify for EIC.

That checkbox is just for whether to include that income or not for EIC.  But including that income or not including that income will vary for how it affects EIC, based on their other income.

[HOPE2]

Thanks a lot  @TaxGuyBill