Drake Tax - 1040: Notice 2014-7 Payments

Article #: 13335

Last Updated: October 18, 2024

 


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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.

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

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