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

[Ag4747]

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.  

[waver123]

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.

[DawnC]

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 

[fanto3k4]

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.

[Vanessa A]

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?

[fanto3k4]

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!

[fanto3k4]

That did the trick!  Thank you!

[MBK05]

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?

[fanto3k4]

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

[DaveF1006]

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

[GjJ3]

@MonikaK1 I have -0- in all of my W2 with this ihss income Medicare waiver payments in box 12a code ii. It will not trigger the question for "Medicare waiver payments" after I enter thr W2 as noted. Do I have to report the income? What options do I have; it's not taxable, but its on a W2 which make no sense. I don't want issues with IRS.

[fanto3k4]

As I mentioned above. I had the exact same problem and went around in circles many times. The key is to fill out everything except box number 12. Then the next screen will show the box you need to check for medical waiver.  I did fill out box 12 a with II but left box 12 blank.

[DawnC]

No, if you do not wish to include the income for Earned Income or Additional Child Tax credit purposes, you do not have to enter the W-2 at all.   Just keep it with your tax records.   See the last note at the bottom of this TurboTax FAQ.     @GjJ3 

[fanto3k4]

I asked my neighbor who has is an IRS agent for 20 years and was told not adding the W2 would cause an issue.  Lots of conflicting advice from the Turbo Tax Experts.  I guess I will find out as I already submitted by return and included the IHHS W2 which had zeros.

[GjJ3]

Pleased update. I want to submit, but it's worrying me. It's exempt income i get it for my son, but reporting exempt income on a W2, why?