W2 - Medicaid Waiver Payments

[megank1]

I have a W2 from IHSS. I want to mail paper return to the IRS and California.

Box 1 = $0

Box 3 and 5 = $10,000

Box 16 = $0

Question 1: When I enter W2 Box 1 and Box 16 on 2022 Turbo Tax, should I enter $0 or $10,000 for form 1040 line 1a? 

Question 2: My W2 box 1 and Box 16 have $0. If I want to mail my returns to the IRS and California, do I have to submit or attach my W2 to my tax returns?

[Cynthiad66]

You simply enter the W-2s as received and TurboTax will allocate appropriately.  Since you are mailing your returns I would attach them.  Easy enough to do plus providing all necessary information for processing.

Question 1:  Enter 0

However, please see instructions below for Line 1a

Line 1a Total Amount From Form(s) W-2, Box 1

 Enter the total amount from Form(s) W-2, box 1. If a joint return, also include your spouse's income from Form(s) W-2, box 1. 

If you earned wages while you were an inmate in a penal institution, you will now report these amounts on Schedule 1, line 8u. Do not report those wages on line 1a. See the instructions for Schedule 1, line 8u. 

If you received a pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457(b) plan and it was reported in box 1 of Form W-2, do not include this amount on Form 1040, line 1a. This amount is reported on Schedule 1, line 8t.

Question 2:  Yes mail the the W-2s.  It is not required however, I would just to ensure they have documentation for the information on return.

[megank1]

Cynthiad66

Thank you for replying. My W2 box 1 and 16 have $0. You told me to enter $0 on Turbo Tax or form 1040 line 1a.  I also enter all $10,000 from box 3 and 5 to form 1040 line 1d and include all amount to get the earned income credit from the federal return. Now, here is the problem. After I done with Federal return and transfer all Medicaid Waiver Payments to California and I want to include all $10,000 to get the California earned income credit, it shows "$0 credit" or none. Is it because box 16 is $0? W2 box 1 and 16 both $0. I enter on Turbo Tax both $0.  How do I include all $10,000 to earnings and get the California earned income credit for 2022?

[Cynthiad66]

Federal EIC computation allows Medicaid Waiver Payments in the computation of the EIC.

California requires earned income to be able to claim the EIC.  $1 of earned income allows computation of the credit if other requirements are met.  See this California EIC computation link for additional information.

[megank1]

Cynthiad66

The Medicaid Waiver Payments allows me to include all or exclude all. It's my option. I want to include all so I can get the California earned income credit.  Your California link doesn't mention about Medicaid Waiver Payments. Here is 2022 California form 3514 instructions(California Earned Income Tax Credit) I found. It's on page 4 and it's about line 13. This is what it says:

"Line 13 – Wages, salaries, tips, and other employee
compensation, subject to California withholding
Enter the total amount of your California wages from your federal Form(s) W-2,
Wage and Tax Statement. This amount appears on Form W-2, box 16. Include
all of your Medicaid waiver payments or IHSS payments even if the payments
are nontaxable for federal purposes."