Get your taxes done using TurboTax

You should be answering NO to the question Did you get any difficulty of care payments from XYZ that aren't in box 1? (This includes payments in other boxes or that aren't on your W-2.)   If you received a normal W-2 with your earnings in Box 1, enter it as is and answer the follow-up questions after.   If the full amount is for Medicaid Waiver Payments, answer Yes to the first question and No to the second question.  

If you received a W-2 with $0 in Box 1, follow the instructions below:

1. Sign in to TurboTax and open your return.
2. Select Search, enter w-2, and select Jump to w-2.
3. Enter all your W-2 info as shown on your form, except Box 1.
4. Enter the amount reported in box 3 of your W-2 in Box 1.
5. On the Let’s check for uncommon situations screen, select the box next to Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.
6. Enter the amount of Medicaid waiver payments into the difficulty of care payment you received from IHHS box.
   • This is the same amount reported in boxes 3 and 5 of your W-2.
   • Your payments are nontaxable, but TurboTax uses this number to calculate credits you may qualify for.
7. When you get to the Earned Income Credit section in Deductions and Credits, we’ll ask if you want to add your Medicaid waiver payment to your income for this credit. You can answer based on what benefits you most.

If you received a 1099 or no form, use this link for instructions.  

If the w-2 issuing agency is your employer, the payments are subject to social security and Medicare taxes.   See Q&A 18 under Agency Questions.  @Ag4747