My sister receives IHSS payments from CA for caring for her daughter. She received a form recently on which she can declare that both the daughter and her lived in the same home. With this declaration, IHSS will issue a proper W2 from 2017+ which will show 0 federal income. The IRS ruling related to this is 2014-7 - search will bring in a lots of information on this. Really surprised that IHSS is sending this information out now when the ruling itself was in 2014.
IHSS is wishy-washy on this - but looks like my sister can file amended returns for the last 3 years. State taxation rules are not very clear - some people claim that once you exclude the income from federal, it gets excluded from state taxation too. Others are chomping the bit and equating "supplemental" payments with regular payments - FTB seems to document the behavior for supplemental but not for regular. I am going to research this more.
This is a big tax savings - so posting it here and if you know somebody who is receiving IHSS payments, please alert them.
lotusgardener said: Is that child support? In-Home Supportive Services (IHSS) ProgramThe IHSS Program will help pay for services provided to you so that you can remain safely in your own home. To be eligible, you must be over 65 years of age, or disabled, or blind. Disabled children are also potentially eligible for IHSS. IHSS is considered an alternative to out-of-home care, such as nursing homes or board and care facilities.The types of services which can be authorized through IHSS are housecleaning, meal preparation, laundry, grocery shopping, personal care services (such as bowel and bladder care, bathing, grooming and paramedical services), accompaniment to medical appointments, and protective supervision for the mentally impaired.
meade18 said: She was paying taxes on non-taxable income because the state sent incorrect forms to her in 2015 and 2016? Did she know about the forms being incorrect then or did she just hear about it now?
State was sending W2's to everybody before 2017 - so there was no way to know whether this was taxable or non-taxable income. Starting 2017, with certain certification on record, state will do the right thing.
The IRS notice is weird, in the sense that the IRS is reversing its own long-held interpretation of the statute, one that had been upheld in court. The law references "foster parents," and individuals being put into their care by the state.The courts have held that a biological parent can't be a foster parent, the terms are incompatible with each other. But the IRS, most likely as a policy matter, decided to make the two terms equivalent. Also: note that the ruling specifically reserves on whether the payment constitute income for FICA or self-employment purposes.
tuphat said: The IRS notice is weird, in the sense that the IRS is reversing its own long-held interpretation of the statute, one that had been upheld in court. The law references "foster parents," and individuals being put into their care by the state.The courts have held that a biological parent can't be a foster parent, the terms are incompatible with each other. But the IRS, most likely as a policy matter, decided to make the two terms equivalent. Also: note that the ruling specifically reserves on whether the payment constitute income for FICA or self-employment purposes.
I was trying to figure out if my sister was entitled to FICA/medicare refund too - but fortunately, none was withheld in the 1st place.
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