UPDATE – 11/3/2016: According to the latest guidance from the California Department of Social Services (CDSS), wages received by Waiver Personal Care Services (WPCS) and/or In-Home Supportive Services (IHSS) providers who live in the same home as the recipient of those services are not considered part of gross income for federal income tax purposes.
CDSS recently mailed the ‘Live-In Provider Self-Certification Information Notice’ and the ‘Live-In Self-Certification Form For IRS Federal Tax Wage Exclusion’ (SOC 2298) forms to providers with the same address as their IHSS client. Those providers are candidates to claim the IRS Wage Exclusion from Federal Income Tax. SOC 2298 allows providers to self-certify their living arrangements in order to claim the exclusion. SOC 2298 must be completed, signed, and returned to the State at the address provided. You can find samples of SOC 2298, as well as more information from CDSS here.
Please note: this material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor or accountant. All decisions regarding the tax implications of this information should be made with the consultation of your independent tax advisor.
—-
March 16, 2016
The California Dept. of Social Services has confirmed with the IRS that IHSS wages earned from providing care to a person living in the same home as the provider are not countable as gross income for federal tax purposes.
This update is related to IRS notice 2014-7, and applies only to those providers who live with their clients. Other applicable tax withholdings such as FICA and UI remain in effect.
Note that the W-2 forms mailed to IHSS providers for the 2015 calendar year do NOT reflect this latest guidance from the IRS, and therefore DO reflect federal income tax withholding. The CA Dept. of Social Services will be working with its payroll system vendor to adjust federal income tax withholding for impacted providers. More information from the state can be found at http://www.dss.cahwnet.gov/cdssweb/entres/pdf/IRSIHSSLetterNewsRelease.pdf.
Please note: this material is for informational purposes only and is not intended to replace the advice of a qualified tax advisor or accountant. All decisions regarding the tax implications of this information should be made with the consultation of your independent tax advisor.
