Drake Tax - 1040: Notice 2014-7 Payments

Article #: 13335

Last Updated: October 21, 2024

 

Tags: Drake Tax

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Where to enter payments described in Notice 2014-7

In some cases certain payments made to taxpayers through the foster care system or by Medicaid CNA are reported on a W2 or 1099-MISC, but may be excluded under this notice and removed from the return. If the taxpayer received payment as described in Notice 2014-7, report the payments in Drake Tax as follows.

Taxpayer Received Form W-2

  1. Open the W2 screen.

  2. Enter information as presented on the Form W-2 received by the taxpayer.

  3. Open screen 3.

  4. Enter the amount to exclude under Notice 2014-7 in the applicable line:

    • In Drake Tax 2022 and future, line 8s.

    • In Drake Tax 2021, line 8z.

    • In Drake Tax 2020 and prior, line 8 and the row titled "W-2 income excluded per Notice 2014-7."

Taxpayer Received Medicaid Waiver Payments that were Not Reported on Form W-2, 1099-MISC, or 1099-NEC

  1. Open screen 3.

  2. Enter the amount on the applicable line:

    • In Drake Tax 2022 and Drake 23, line 1d.

    • In Drake Tax 2021 and prior, line 1 Other income reported on line 1 (NOT W-2 wages).

  3. Enter the amount to exclude under Notice 2014-7 in the applicable line:

    • In Drake Tax 2022 and future, line 8s.

    • In Drake Tax 2021, line 8z.

    • In Drake Tax 2020 and prior, line 8 and the row titled "W-2 income excluded per Notice 2014-7."

Taxpayer Received Form 1099-MISC, Box 3 Amount (Drake22 and Future)

  1. Open the 99M screen.

  2. Enter information as presented on the 1099-MISC received by the taxpayer.

  3. In the For drop list, choose 1d - Form 1040, line 1d if Other income.

  4. Open screen 3.

  5. Enter the amount to exclude under Notice 2014-7 on line 8s.

  1. Open the 99M screen.

  2. Enter information as presented on the 1099-MISC received by the taxpayer.

  3. Open screen 3.

  4. Enter the amount to exclude under Notice 2014-7 in the applicable line:

    • In Drake21, line 8z.

    • In Drake20 and prior, line 8 and the row titled W-2 income excluded per Notice 2014-7.

Taxpayer Received Form 1099-NEC (previously 1099-MISC, Box 7)

  1. Open the 99N screen.

  2. Enter information as presented on the 1099-NEC received by the taxpayer.

  3. In the For drop list, choose C.

  4. Open screen C.

  5. Enter the amount to exclude under Notice 2014-7 in the field titled Income to be excluded per Notice 2014-7, located below Part II, Expenses, on the C screen.

Notice 2014-7 Income and EIC

Notice 2014-7 income is included in the EIC calculation by default. If you wish to exclude Notice 2014-7 income from earned income and have it omitted for Earned Income Credit purposes, use the following data entry:

Starting in Drake Tax 2022, use the drop list available on the EIC screen. Three options are available:

  • T - Exclude Taxpayer's Medicare Waiver Payments only

  • S - Exclude Spouse's Medicare Waiver Payments only

  • X - Exclude both Taxpayer's and Spouse's Medicare Waiver Payments

In Drake21 and prior, check the box Exclude Medicare waiver payments from the earned income credit calculations on the EIC screen.

In Drake20 and Drake19, check the box Exclude Medicare waiver payments from the earned income credit calculations on the 8812 screen.

In Drake18, the Notice 2014-7 income was not included in EIC calculations by default. To include those amounts in EIC calculations, use the check box on the 8812 screen under Notice 2014-7 Income.

For more information on Notice 2014-7 visit the IRS Notice 2014-7 website.