W2 with box 1 empty Can't e-file

[tmixson1]

Hi,

I received mine W2 form my employer. I am a healthcare provider for my son, we live in New Jersey. I have a W2 where box 1 ($0) and box 12a (II $14,445) box 16 ($14,445) and box 17 ($161)

If I remove the W2 from mine return, I will lose the Child Tax Credit and the Earned Income Credit. If I keep the W2 on mine return, I cannot e-file.

Can I remove the W2 and put the $14,445 under other income to receive mine Child Tax Credit and the Earned Income Credit? 

[MaryK4]

In TurboTax, after you enter the W2 information, you can indicate the payment (see screen below).  TurboTax Tax will make the adjustments so that you can use the income for the credits.  Also note- New Jersey is not taxing this income (see NJ Division of Taxation - Exempt (Nontaxable) Income) so you can adjust the Box 16 amount to zero so you can get the withholding refunded.  

If you get the efile error for the zero wages W2, please add to this post, TurboTax should make the adjustments needed so this does not happen so we can check it for you.  

[hkluis]

How can we make a request for a change to tolerate the zero Box 1 in W2, especially if the Medicaid waiver box is checked or (new in 2025) W2 Box 12a shows reason "II" with the waiver amount indicated?

This has been a perennial problem with TurboTax over the years.  I got around it by entering a trivial amount like $1 in Box 1.

[hkluis]

Now it looks like if the W2 Box 12a indicates code "II - Medicaid waiver..." (new in 2025) and the non-taxable amount, TurboTax will no longer present the "Medicaid waiver" checkbox in the "less common situation".  This behavior is correct.  However, TurboTax is still flagging the zero value of W2 Box 1.

[BrittanyS]

If your W-2 has an amount in Box 3, you will enter that amount in Box 1.  Here are the steps provided by TurboTax for entering nontaxable Medicaid Waiver payments:  

1. Open or continue your return.
2. Navigate to the W-2 section:
   • TurboTax Online/Mobile: Go to W-2.
   • TurboTax Desktop: Search for w-2 and select the Jump to link.
3. Enter all your W-2 info as shown on your form, except Box 1.
4. If you have a number instead of zero in Box 3, enter that number again 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 & 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.

See the link below for more information:

• How to enter nontaxable Medicaid waiver payments in TurboTax

@hkluis 

[Thomas-C]

I am in the same situation, but I don't see the same option that allows me to select as the above.  This is my screen:

Why am I missing the "Nontaxable Medicaid Waiver payments that qualify as difficulty of care payment" option?

[BrittanyS]

Are you entering under the W-2 entry?  It looks different as it says for public partnership.  The selection should be available under the W-2 entry for uncommon situation.  See screenshot below:

@Thomas-C