Workers compensation for occupational sickness or injury are not taxable if paid under a workers' compensation act.
The W-2 will need to entered as it is because the IRS will be looking for that income.
But, you have a work around so you don't end up with increased taxable income.
- Sign into TurboTax
- Click on Take me to my return
- Click on Federal in left column
- Scroll down to Less Common Income and click Show more
- Scroll down to Miscellaneous Income, 1099-A, 1099-C and click Start
- Go to Other reportable income and click Start
- Any Other Taxable Income? click Yes
- Enter a description (workers' compensation correction) and enter Amount as a negative number
