The following information was shared with us for IHSS families who child lives at home.
***FOR INFORMATION ONLY, PLEASE CHECK WITH YOUR TAX PERSON**
IHSS and Respite Income
http://www.tacanow.org/news/ca-only-qualified-medicaid-waiver-payments-not-subject-to-federal-tax-in-2014/ " Taxpayers may exclude payments defined in Notice 2014-7 from taxable income in 2013. They may also file amended returns for any return open under IRC section 6511. That code sections means any return filed within the past 3 years.
Please note, IRS Notice 2014-7 mentions both IHSS and respite payments.
The California Tax Code conforms to Internal Revenue Code Section 131 by statute, therefore these payments are also excludable from California personal income tax.