IHSS Tax Exempt - Can't E-file with W2 having $0 in Box 1

[Lance676]

Back to the original question.  There’s no way to avoid having to mail it in?

[smallshrimp]

Good news. I just e-filed my 2022 tax return by changing the box 1 and 2 in my IHSS W-2 to $1 instead of $0. Both Fed and CA e-file return was accepted shortly. So the $1 hack is working now apparently! Cheers!

[Lance676]

Me too!  Thank you Jesus 

[MonikaK1]

You don't have to mail in your return when you have IHSS income in California with $0 in Box 1 of Form W-2, and you don't have to put in a $1 plug figure. 

The entry for IHHS income changed this year. You will enter your W2, even though it may show $0 in Box 1. This will also allow you to claim earned income credit in California.

Please see the post from CatinaT1 above and follow the step-by-step directions.

@Lance676 

@smallshrimp 

@waver368 

[Kupe]

I too have a W-2 with no entry in Box 1.   My employer used the W-2 solely to report a $750 contribution to my Health Savings Account HSA.  This is in Box 12a, code W.   Of course TurboTax does not allow the eFile due to Box 1.   And there is no way I will omit this W-2 since there is the valid HSA contribution.   It kills me, but heading to the post office for what will surely be an hour or three in line.  

[smallshrimp]

I was using TurboTax Premium 2022 and it won't allow me to efile if the W-2 box 1 is $0. I had to change the box 1 to $1 to see the button leading to the efile page in TurboTax, otherwise the button is hidden, and therefore, efiling is not available. This is apparently a TurboTax issue.

[smallshrimp]

Why not try changing Box 1 to $1? It's working for me this year.

[DawnC]

After you enter the W-2 as is, on the Let’s check for uncommon situations screen, check the box that says “Nontaxable Medicaid waiver payments that qualify as difficulty of care payments”.

See Qualified Medicare Payments -  You can enter a zero in Box 1 with no error.

@smallshrimp 

[smallshrimp]

Ah! Got it. I will have to try it next year since I've already send the efile, but thanks! That makes sense.

[june100]

hello,

after following the steps, it says to "enter the total amount of difficulty of care payments you received from ___."

What do I put in that box? $0? or the amount from SS or Medicaid?

[CatinaT1]

This will be the amount in boxes 3 and 5.

See the instructions below for how to report this depending on how the income was reported to you. 

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

1. Sign in to TurboTax Online, click Continue 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 Salaries, click Edit/Add next to Form W-2;     
4. Click on Add a 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 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. 

[june100]

After getting to the end of submitting. It says I can’t submit and I must file my return by mail because:

"All of the following lines of Form 1040 have a zero value
Line 9 - Total income
Line 11 - Adjusted gross income
Line 16 - Tax
Line 18 - Total Tax Before Credits And Other Taxes
Line 21 - Total credits
Line 24 - Total tax
Line 33 - Total payments"

So I can't e-file it at all?

Thank you so much for your response /help!

[MarilynG1]

In your Federal return, you could Delete your W-2 and re-enter it, using the steps outlined by @CatinaT1 above.

You may have missed Step 6, entering the amount of your IHSS payments, as reported in Box 3 and 5 on your W-2. 

@june100 

[shykumar]

Hi there - I did wat you mentioned about putting $0 in Box 1 and all the steps you outlined. It still gives me an error that it cannot be efiled.

[CatinaT1]

Try deleting the W2 and reentering. Be sure to follow the instructions carefully. This should not give you an error. You may need to clear your cookies and cache before reentering.

TurboTax can exempt income under Notice 2014-7 per the IRS instructions for Medicaid Waiver payments from IHHS. This Notice provides that certain payments received by an individual care provider under a state Medicaid Home and Community-Based Services Waiver (Medicaid waiver) program are difficulty of care payments and excludable as income. Additionally, you can choose to use this income to calculate Earned Income Credit. Regardless, the income will remain non-taxable.    

This tax-exempt income can be reported to you differently depending on your state and county. You might receive a W-2, 1099, and no form at all.  

See the instructions below for how to report this depending on how the income was reported to you. 

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

1. Sign in to TurboTax Online, click Continue 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 Salaries, click Edit/Add next to Form W-2;     
4. Click on Add a 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 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. 

If you received a 1099 or no form: 

1. Sign in to TurboTax Online, click Continue 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. Scroll down to Less Common Income;      
4. Click on Start next to Miscellaneous Income, 1099-A, 1099-C. 
5. Click on Start next to, Other income not already reported on a Form W-2 or Form 1099;     
6. Answer Yes to Did you receive any other wages?;     
7. Leave blank the box for Wages earned as a household employee and click continue; 
8. Leave blank the box for Sick or disability pay and click continue;      
9. Enter the amount of Medicaid waiver payments on Certain nontaxable Medicaid waiver payments not reported on Form W-2, and click Continue. 
10. 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. 

 
For more information, refer to IRS Notice 2014–7, 20144 I.R.B. 445 and the IRS FAQs.