You would enter the Form W-2 amounts as reported to you and the IRS. In order to pass the error check, you should enter a zero in Box 17.
If the form is incorrect, and you had state taxes withheld, you would need to have the employer issue a corrected W-2. Unfortunately, if they did not withhold state taxes (even if you did not indicate this), you have to report it as such because nothing was paid in.
Unless you are deemed to have underpaid your tax to a certain extent (depending on your state's rules), you will not be penalized for not having tax withheld. The income would still be taxable in the state, but all of your withholding for that state and any credits you may be eligible for will be taken into consideration.
If you are still employed at the referenced company, you should contact the payroll department to adjust your state tax withholding.
