My w-2 has "0" in box 1.All my difficulty of care payments are listed in box 16.Where do I list this income in my Oregon taxes? federal taxes?

[scremlaw]

Box 1 is blank, but 16 has the amount I earned as difficulty of care payments.  My spouse and I have other income.  When I follow the directions to go under misc income and note "Notice 2014-7"  and enter the amount with a minus sign, the amount in box 16 is subtracted from our income, but it wasn't initially counted, so it reduces our taxable income when it shouldn't.  (ex if our other income was 100000 and box 16 had 5000, our income would be reduced to 95000 when it was actually 100000 plus the non-taxable 5000)

[RBBrittain · Accepted solution]

The directions you're referring to were part of a workaround last year if your payer did NOT put zero in Box 1; instead of entering the W-2 itself you entered one line of miscellaneous income with the W-2 amount & EIN, then an offsetting negative entry mentioning the notice to let the IRS know why the W-2 wasn't entered normally. (It may not even work this year; I only became aware of this kind of payment a few days ago from another TurboTax user claiming the negative amount kept them from filing.) You don't need to do that because your payer correctly entered zero in Box 1, thus there's nothing to offset on your Federal return.

If Oregon treats it as taxable, Box 16 should put it on your state return; that box is your total Oregon wages, and is not specific to this kind of payment. If it's not taxable in Oregon, your payer needs to correct your W-2 to show zero in Box 16 as well.