Do I need to include all my W-2s when filing my taxes - even ones with $0 in Box 1? (US tax question)

The issue you're running into is actually pretty common this year because of the change in how Medicaid waiver payments are reported. You absolutely do need to include all W-2s when filing your taxes, even if Box 1 shows $0. The reason TurboTax is telling you to file a paper return is because the IRS e-file system has certain validation checks, and one of them flags returns with W-2s that have $0 in Box 1. This isn't just a TurboTax limitation - it's related to how the IRS processes electronic returns. As for including the Medicaid waiver payments as earned income - you're right that it's optional. If including these payments would qualify you for a larger Earned Income Credit or other benefits, you can choose to include them. But if not, you can exclude them as nontaxable income. Unfortunately, if you want to e-file, you might need to try a different tax preparation service. Some tax preparers have workarounds for this situation that consumer software doesn't. Otherwise, you'll need to file a paper return this year.

After struggling with a similar Medicaid waiver payment issue on my taxes, I finally found a solution with taxr.ai (https://taxr.ai). My situation was almost identical - had a W-2 with $0 in Box 1 and nontaxable payments in Box 12 with Code II, and TurboTax kept forcing me to paper file. I uploaded my documents to taxr.ai and got personalized guidance on how to properly report these payments. They explained that while you must include all W-2s in your filing, there are specific ways to handle the Medicaid waiver payments based on your overall tax situation. The tool analyzed whether including the payments as earned income would benefit me or not, which was super helpful since I was just guessing before. It ended up saving me from unnecessarily reporting the income which would have actually increased my tax liability!

I was super skeptical about taxr.ai when I first saw it mentioned here, but after struggling with my Medicaid waiver W-2 for weeks, I decided to give it a try. I'm honestly shocked at how helpful it was! I uploaded my weird W-2 with $0 in Box 1 and my other tax documents, and got clear guidance within hours. They explained that the IRS validation issue is because their system expects wages in Box 1 to validate against Social Security tax calculations. The best part was they connected me with a tax pro who actually COULD e-file my return using professional software, which apparently has ways to handle these special cases that consumer software doesn't. Saved me from having to mail in a paper return and wait months for processing. If you're dealing with Medicaid waiver payment reporting, definitely worth checking out!

If you're stuck in the paper filing nightmare because of your $0 Box 1 W-2, I feel your pain! I had the exact same issue and was dreading the months-long wait for processing a paper return. After multiple failed attempts to contact the IRS for guidance, I tried Claimyr (https://claimyr.com) and was honestly shocked at how well it worked. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was able to get through to an actual IRS agent in about 20 minutes instead of waiting on hold for hours. The agent confirmed that yes, you do need to include all W-2s even with $0 in Box 1, but they also gave me specific guidance on how professional preparers can code these special Medicaid waiver payment W-2s to allow e-filing. This wasn't information I could find anywhere online!

I'm honestly shocked - I need to eat crow here. After posting my skeptical comment, I was desperate enough to try Claimyr anyway (what's $20 compared to waiting 8 months for a paper return to process, right?). Within 30 minutes I was talking to an actual IRS agent who not only confirmed everything about needing to include all W-2s, but pointed me to a free VITA site in my area that has the professional software capable of e-filing returns with $0 Box 1 W-2s. Apparently volunteer tax sites have access to professional versions of tax software that can handle these special cases. So for anyone else dealing with Medicaid waiver payment W-2s - yes, you need to include them all, but no, you don't necessarily have to paper file. There are options! The agent even emailed me documentation about the Code II in Box 12 for my records. Worth every penny for that peace of mind alone.

I'm a tax preparer and want to clarify some things about W-2s with $0 in Box 1. The IRS absolutely requires all W-2s to be included with your tax return, regardless of the amount in Box 1. The e-filing limitation exists because the IRS validation system checks for consistency between income reported and Social Security/Medicare taxes withheld. For Medicaid waiver payments specifically (those new Code II entries in Box 12), professional tax software has methods to properly code these that consumer software like TurboTax doesn't. So you have three options: 1. File a paper return with all W-2s attached 2. Visit a VITA/TCE site where volunteers use professional software 3. Hire a professional preparer who uses professional software And yes, you still have the choice of whether to include the Medicaid waiver payments as earned income or exclude them as nontaxable. That's a separate decision from whether you need to include the W-2 itself.

I just want to add that I went through this exact situation last year with my mom who gets Medicaid waiver payments. What we found was that H&R Block's paid professional service (not their DIY software) was able to e-file her return even with the $0 Box 1 W-2. It cost about $150 but honestly worth it to avoid the paper filing headache. The tax pro told us they have special software that can handle these cases. Might be worth considering if you can't get into a VITA site.

I've been helping caregivers with this exact issue all tax season. The confusion around Medicaid waiver W-2s is really widespread this year since it's the first year many people are getting them. Just to reinforce what others have said - you absolutely must include ALL W-2s with your return, even ones with $0 in Box 1. The IRS considers this a complete reporting requirement regardless of the amounts. The e-filing block you're hitting is real and affects most consumer tax software. The IRS validation system expects certain relationships between wages, Social Security wages, and Medicare wages that don't exist when Box 1 is zero but other boxes have amounts. One thing I haven't seen mentioned yet is that some online tax services like TaxSlayer Pro actually CAN handle these situations and allow e-filing. It's worth checking with a few different services before giving up on e-filing entirely. Regarding whether to include the Medicaid payments as earned income - run the numbers both ways if possible. Sometimes including them gets you a larger Earned Income Credit that more than makes up for any additional tax. Other times it's better to exclude them. It really depends on your specific situation, income level, and family size.