You are correct that IHSS income is non-taxable; however, some people want to file their W-2 in order to claim the Earned Income Credit. Tax law recently changed to allow the non-taxable income to be included for claiming the credit.
If you don't want to claim the EIC and the amount in Box 1 of your W-2 is below $12,550 (the standard deduction), you don't need to report it; just keep it for your records. If it is above that amount, you can enter it in TurboTax and make an Adjusting Entry to make the amount non-taxable.
Click this link for info on How to Manually Enter a W-2.
To make the Adjusting Entry:
Under Wages & Income, scroll all the way down the page to Miscellaneous Income, 1099-A, 1099-C. On the next page, scroll all the way down to Other Reportable Income.
Enter 'IRS Exempt 2014-7' for the 'Description' and enter the amount you reported in the W-2 section with a minus sign (-12420, for example).
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