Since Box 1 is zero, entering the W-2 will not get you EIC, however, you still need to enter the W-2.
Then follow the steps below.
Steps
Enter it again as Other Reportable Income under the Miscellaneous Income section. Take the following steps:
- Sign in to TurboTax Online, click Continue your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);
- Click on Federal Taxes at the top of the screen;
- At the bottom of Your Income box pick the option in blue to help me add other income, then jump to full list;
- Scroll down the page to the last section titled: Less common Income and click show more;
- Select start or update next to the last topic titled Miscellaneous Income, 1099-A, 1099-C;
- Scroll down to the last option titled Other reportable income and select start or edit;
- When it asks, "Any other reportable income?" say yes then you will make two entries:
- Your first entry description would be W-2 EIN # (enter EIN number from W-2) Medicaid Waiver Payments, and enter your wages as a positive number.
- Next you click "Add Another Miscellaneous Income Item," and enter this description: IRS Notice 2014-7 excludable income and enter your wages as a Negative (-) number.
This both shows and explains removing the zero in W-2 income and places a zero on Line 21 of your Form 1040.
If your W-2 has federal or state taxes withheld, you can enter these amounts in the Deductions & Credits section under Other Income Taxes as Withholding not already entered on W-2.
For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs.
