Can't E-file with W2 having $0 in Box 1- IHSS provider with exempt income

[next_milenium]

I am an IHSS provider with live-in client. This makes the income tax exempt.  My W2 is correct and shows $0 for Box 1 and 2. But I do have Social Security Tax and Medicare withheld in Boxes 4 and 6.

Since box 1 contains $0, Turbotax won't let me E-file. I'd like to E-file for convenience and receiving my refund faster.

I've searched this forum and there seems to be 3 different recommended ways to get around this:

1) Enter the income as Less Common/Misc Income.

2) Enter $1.00 as income in box 1. 

3) Don't bother reporting the W-2 because my income is exempt anyways.

So, which way should I go? Will any of the above workaround trigger IRS audit? Any recommendation from the experts would be greatly appreciated. Thank you.

[macuser_22]

Since SS and Medicare does not go on a tax return and the IRS does not want a W-2 with zero in box 1 then there is no reason to even enter the W-2, but what are your trying to do.   It is way too early to file a 2020 tax return - the IRS will not start accepting 2020 tax returns until after Jan 27, 2021 and 2019 and earlier returns can no longer be e-filed at all - for anyone.

[next_milenium]

Thanks for your reply.

I'm not trying to file now or early. I ran into this situation this year so I'm just trying to prepare better for next year.

If I leave W-2 out, will that some how trigger alert for IRS?

[Critter-3]

Leaving off the Zero income W-2 is the correct thing to do according to IRS rules.  

[waver123]

I need to add my IHSS w-2 though since I'm overpaying my social security tax (I'd a regular job also).
I don't like the changing to $1 solution and printing to paper and snail mail file seems wasting paper and also prone to errors.
And this year seems we still have the same limitation of can't e-file.
Argh no good solutions.

[MonikaK1]

You can enter your IHSS W-2 in TurboTax even if it has a zero in Box 1 and e-file your return.

If you receive a W-2 for IHSS / Difficulty of Care / Medicaid Waiver payments addressed by IRS Notice 2014-7, and you have amounts in Boxes 3 through 6, you should enter the W-2 in TurboTax in the W-2 section. 

If there is a zero in Box 1, follow these steps:

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.
4. 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.
5. 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.
6. 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.

Before this procedure was available in TurboTax for payments reported on a W-2, there was another method where the payments were reported under Miscellaneous Income. Steps for both are covered under the current TurboTax help article.

See this IRS FAQ page for more information regarding Medicaid Waiver payments.

[waver123]

thanks for the help, but I do have some questions about what you'd suggested, I presume using the method you suggested I should only enter my "normal" w-2 (let's say it's from A Inc.) and would not enter the $0 incoming w-2 from ihss, and then select non-taxable medicaid wavier payments, however if I did that TurboTax would then ask me how much of the $ in box 1 from A Inc is difficult of care payment and the amount, which does not seem correct since it's not from A Inc.

>> Enter the total amount of difficulty of care payments you received from A Inc .

If I select "none of it" and put $0 as amount of difficult care I received from A Inc, then it will not ask for any additional info and no change in refund.
If I add a second w-2 with $0 and select medicaid waiver payments, I can enter the proper amount and got some more refund (due to overpaid social security taxes etc) but then I got the same issue of not being able to efile because box1 of a w-2 is $0.

[JamesG1]

You would enter the W-2 from A Inc as well as the W-2 from IHSS for $0.

You do not select Nontaxable Medicaid waiver payments... for the W-2 from A Inc.

You do select Nontaxable Medicaid waiver payments... for the W-2 from IHSS.

.You should be able to Review and file the tax return electronically.

@waver123 

[waver123]

Thanks I enter ihss as a 2nd w-2 with box1 is 0 and clicked Nontaxable Medicaid waiver payments, but at review sections it still says can't e-file due to box1 less than $1.

---

---

"It looks like you have a tax situation in your federal return that makes it ineligible for e-filing, according to IRS rules.
Here are the details:
  One of the W-2s doesn't have an amount in box 1 or the amount is less than $1.  If there is an extra W-2 added to the return by mistake, delete the extra form.  Otherwise, the return must be filed by mail."

[MonikaK1]

Thank you for the update.

I would like to take a closer look at this situation, as the solution we posted, entering zero in box 1, had previously been working for other users. 

To help us troubleshoot this, you can send us a “diagnostic” file that has your “numbers” but not your personal information.  If you would like to do this, here are the instructions for TurboTax Online users: 

Go to the black panel on the left side of your program and select Tax Tools. 

1. Then select Tools below Tax Tools. 
2. A window will pop up that says Tools Center.  
3. On this screen, select Share my file with Agent. 
4. You will see a message explaining what the diagnostic copy is.  Click okay through this screen and then you will get a Token number. 
5. Reply to this thread with your Token number. This will allow us to open a copy of your return without seeing any personal information.  

We will then be able to see exactly what you are seeing and we can determine what exactly is going on in your return and provide you with a resolution.

If you are using TurboTax Desktop please comment back and I will give you those instructions.

After sending the diagnostic file - 

You can enter $1 instead of $0, which should clear the error and allow you to e-file.

[waver123]

Hi I'm using the desktop version (premier) not online version though.

[MonikaK1]

Thank you; here are the instructions to share your file for Desktop users:

1. From the black bar at the top of your screen, select Online
2. Click Send Tax File to Agent
3. Click Send on the message that pops up
4. TurboTax will create a "sanitized" copy of your return information with no personal info
5. Post the 7-digit token number here in this thread

[waver123]

thanks, here's the token 1195200.

[MonikaK1]

Thank you; I will review the file and post again on this thread.

[MonikaK1]

I have reviewed the file. I see now that entering $0 in Box 1 does create an error in the final review.

To resolve the error, enter $1 in Box 1 for the IHSS W-2. Select Nontaxable Medicaid waiver payments for the W-2 from IHSS as before.

You will see a follow-up screen (see screenshot below)

 

Select the radio buttons as shown, that all of the $1 is difficulty of care payments, and that you got more difficulty of care payments that weren't in box 1. Enter the total payments not included in box 1 in the box provided.

This will resolve the error that prevented e-filing, and allow you to get the excess SDI credit.

Thank you for reporting this issue. I will elevate the issue, and that the TurboTax help article should be reviewed for revision.

@waver123