Yes, if you're entering a W-2 in TurboTax, you need an amount in Box 1 (at least $1), but it can't be a negative number.
If you know your income is tax-exempt and you're not claiming the Earned Income Credit, you don't need to enter your W-2 in TurboTax, just keep it for your records.
If you do want the EIC, enter your W2 just like it is in that section. You will get to the step on the Uncommon Situations page where you will check that you have Difficulty of Care Payments and TurboTax will ask you how much of the amount in Box 1 is for Difficulty of Care Payments. Indicate the entire amount and that will make it non-taxable income on your tax return.
Here's more info on Entering a W-2 for Difficulty of Care Income.
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