Medicaid waiver payments box 12 code II question

[jessicawc7]

If I get a W2 with an amount in Box 12, Code II (medicaid waiver payments), but no amount in line 1, how is that entered and still be able to efile?  I know that I don't have to enter it if I don't have any other W2s, but we do have 1 W2 with regular income that already qualifies us for the EITC, so I do not need this W2 for that EITC as I saw in the other questions, but at the same time, if I just don't turn this W2 in at all to the IRS, wouldn't our tax return with the other W2 be red flagged by the IRS due to them getting a copy of this other W2 that we did not put with the one we are turning in?  I don't mind turning this in because we do get a tax refund with the other normal W2 that we have, but I want to make sure I do this correctly and still get to e-file because if I mail this in, it takes a lot longer for it to get processed, so I definitely want to e-file but also don't want to do anything wrong to cause our tax return to be red flagged if that makes sense?  And we always use turbotax because it is pretty much mostly self-explaining on how to do our own taxes and not have to pay someone a lot of money to do them with this different odd situation.

[BillM223]

Last year, employee tax expert CatinaT1 gave a very good answer to your question:

If you received a W-2 with $0 in Box 1:  

1. Sign in to TurboTax Online, click Continue to your return, then pick up where I left off (if you are using TurboTax CD/ Download, then just open your return on your computer);
2. Click on Federal Taxes, and then click on Wages & Income;
3. Under Wages and Income, click Start;
4. Click on Work on my W-2, and enter the information as reported on your W-2.
5. After entering all your W-2s, you will see the screen, Let’s check for uncommon situations. Next to Nontaxable Medicaid waiver payments, check the box.
6. You will enter the amount of Medicaid Waiver Payments into the box asking for the total amount of difficulty of care payment you received from IHHS. This will be the same amount reported in Boxes 3 and 5 of your W-2.
7. When you get to the Earned Income Credit section under the  Deductions and Credits portion of your return, you will be asked if you want to add your Medicaid waiver payment to your income for this credit. You can try it both ways, including it and excluding it from the calculation for the credit and see which way benefits you most.

Please see her whole response at this link.