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

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.

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?

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

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.

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.

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.

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 

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."

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.

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

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

thanks, here's the token 1195200.

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

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 

Hello!  This doesn't seem right.  When you get a W2 with 0 in box 1, that means you haven't been taxed for the Social security and Medicare wages  listed in boxes 3 and 5 of the W2, and don't need to pay taxes on that amount either.  However, when you put $1 in box 1 and indicate rest of the Social security / Medicare wages as difficulty of care payment received from IHHS, the taxable income for CA on the return form gets adjusted by the amount in box 3 and 5 (Social security / Medicare wages).  For example, if the amount in box 3 and 5 is $10,000, the taxable income on the CA tax return form gets decreased by $10,000.  This ends up in a bigger tax refund for the CA portion.  This doesn't seem right since you're reporting $1 income and getting $10,000 deducted from the total income.  I have a W2 from a different job as well and the $10,000 gets deducted from my adjusted gross income for CA taxes when I follow what is being recommended.  If I put $10,000 in box 1, then indicate $10,000 as difficulty of care payment received from IHHS , that adjustment doesn't happen.  I feel like putting $0 or $1 in box 1 with the  $10,000 for difficulty of care payment received from IHHS is going to cause issues.  What's the correct way to do this?  Am I missing something?  The reason I want to include the W2 with 0 in box 1 is to get a refund of the excess social security taxes I have paid.  

yeah I think you're right.

I almost think we should enter $1 for box1, click button that's all of $1 is difficult of care payments and no other care payments.

You should be answering NO to the question Did you get any difficulty of care payments from XYZ that aren't in box 1? (This includes payments in other boxes or that aren't on your W-2.)   If you received a normal W-2 with your earnings in Box 1, enter it as is and answer the follow-up questions after.   If the full amount is for Medicaid Waiver Payments, answer Yes to the first question and No to the second question.  

If you received a W-2 with $0 in Box 1, follow the instructions below:

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 as shown on your form, except Box 1.
4. Enter the amount reported in box 3 of your W-2 in Box 1.
5. 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.
6. 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.
7. 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.

If you received a 1099 or no form, use this link for instructions.  

If the w-2 issuing agency is your employer, the payments are subject to social security and Medicare taxes.   See Q&A 18 under Agency Questions.  @Ag4747 

1. 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.
2. Enter the amount of Medicaid waiver payments into the difficulty of care payment you received from IHHS box.

There is no box Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.

If you entered II in box 12 while entering the W2, there will not be a box to check in uncommon situations.  If you leave the box 12 blank, that will pop up.  This prevents double entry since the box 12 code II now does the same thing.

Do you have anything on the rest of the W2?  Do you have other income?  Are planning on using this income to claim the Earned Income Tax Credit?

My wife got a W2 from IHHS for taking care of our child.  All boxes are 0. 12 a is II and 12 has 18k....  I can't e file because of the 0 in box 1.  Your help files tell you to either don't submit a W2, or put a $1 in box 1.  Or... do what is listed above, checking a box that doesn't exist!

That did the trick!  Thank you!

The list of uncommon circumstances offered to me does not  include an option for  

Nontaxable Medicaid waiver payments that qualify as difficulty of care payments.

Below is the list of options I have to choose from. 

*W-2 was corrected by my employer (Form W-2c)

*Unreported tips

*Paid family leave

*Nonqualified pension plan not on my W-2

*Worked outside the U.S.

*Religious employment

*Inmate or lived in a halfway house

*Employed by a foreign government or international organization

*None of these apply to me

How would I complete this correctly without that option?

Leave box 12 empty and the option will show up.  After you check the medical exemption box you fill in box 12.

It would not be in the list of options that you stated. It is report in Box 12 of the W2 with Code 11.