Enter the W-2 as prepared. Since the W-2 reports $0 Federal income and a positive dollar amount in box 16, it appears that what you received is considered taxable by the state of Colorado. Are you able to enter the W-2 as it is written?
Difficulty of care payments are not taxable or reportable on the Federal income tax return. IRS Notice 2014-7 can be found at this link and explains that certain Medicaid Waiver Payments for In-Home support services are excludable from gross income and should not be included in your earned income. This is the case even if you have received a W-2 for performing these services.
This Colorado directive explains that some payments received in Colorado qualify for treatment as an exclusion and some do not.
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