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line 1D Medicaid waiver payments not reported on forms W2 box one so enter your taxable Medicaid waiver payments that were not reported on forms W-2 also enter the total of your taxable and non-taxable Medicaid waiver payments that were not reported on forms W-2 or not reported in box one of form W-2 if you choose to include non-taxable payments and earn income for purposes of claiming a credit or other tax benefit so note that generally obviously income is bad for taxes so if you can not include something as income that is usually beneficial however there are situations such as for the earned income tax credits when reporting the income may have a tax benefit because something like the earned income tax credit for example actually goes up as earned income goes up up up to a certain point and then basically it goes back down so you end up with these weird situations where the IRS might have something thats trying to help people out by not including something in earned income which is