How to resolve Lacerte diagnostic ref. 363 - W-2 contains no wages

This article will help resolve following e-file critical diagnostic:

• Form W-2 #: Contains no wages. If the W-2 is reporting nontaxable third-party sick pay verify that Box 12(a, b c or d) contains J - Nontaxable sick pay and Box 13 is marked Third-party sick pay. Enter combat wages reported in box 12 (Q - Combat Pay) of the W-2 when reporting Military Combat Pay for members of the U.S. Armed Forces who served in a combat zone. (ref. #363)

What's new for Form W-2 for tax year 2024:

• Box 12 has been updated to include a new code II for Medicaid waiver payments excluded from gross income under Notice 2014-7
  • If Box 1 Wages, tips, other compensation isn't blank, this return can be e-filed as normal.
  • If Box 1 Wages, tips, other compensation is blank and you're receiving an error that this return can't be e-filed: These returns will be rejected as the e-file systems are being updated to include this new situation in the e-file rules.

To resolve the diagnostic follow these steps:

Option 1:

1. Review the information in the e-file critical diagnostic. If any of the Box 12 subsection dropdown menus has a code of DD - Cost of employer-sponsored health coverage and an amount, but no wages are reported, the diagnostic will be generated.
2. Per F1 help on Screen 10, Box 12a (code 46):
   • DD - Cost of employer-sponsored health coverage. The amount reported with code DD isn't taxable.
   • Because this amount has no effect on the tax return, all information related to code DD can be removed.

Option 2:

Paper file the return.

This e-file diagnostic can also generate under the following circumstances:

• If previously entered W-2's have been deleted for the current tax year.
• If the client file has been damaged.
• If the diagnostic is generating for W-2's that are no longer present on Screen 10, Wages, Salaries, Tips. Delete the current W-2, and reenter the information.
• In Screen 10, Wages, Salaries, Tips review the States(s) column.
  • Make sure the correct states are selected.
  • Check assigned entries at the beginning of the screen.
  • Scroll down to (1) Wages, tips, etc, press Ctrl+E to open the window and make sure there are wages being sourced to a state with an S in the Source column, and there's also a line for the total US wages to be reported on Form 1040.