This box is used for additional information by the employer. This means you participated in a Cafeteria Plan, or a Section 125 Plan. It could have been a medical spending account or something similar. It needs to be entered, but will not effect your return.
Turbo Tax is asking if this amount was deducted or deferred from the salary. I don't believe it was deducted.
The question TurboTax is asking is, "is the amount deducted or deferred from the salary?"
The only options are Yes/No.
How do answer that question with a Yes or No response?
The answer is "Yes" - the CAF125 is a deferment (pre-tax) of the employee's wage and should already be subtracted from the total amount reported in Box 1 of the W-2.
The CAF125 entry in Box 14 does not change the way the return is prepared and/or filed.
See What Is "Cafe 125" on a W-2 Tax Form? for a more detailed description of this entry.
Turbotax is asking for a category for this. What is the most appropriate one? Thank you for your help.
The last one "Other (not classified)"
Usually, box 14 is only used for your company payroll department.
In this case, Tax Software does not even use it.
SOMETIMES Box 14 is used for one of the categories on the drop-down list and it is an additional tax or deduction. For example, some Pennsylvania employees have to pay an unemployment tax, and that tax is listed in Box 14.
Most employees subject to these additional taxes are aware of it and know to select the correct category for box 14.
Your box 14 is reporting something that is simply informational to you and your employer. Select "Other" or leave all Box 14 blank.
What do you select from the drop down menu for that code?
If the categories for your deductions in Box 14 are not listed as an option, then you can select the category labeled Other - not classified.
Generally, the Box 14 items of your W-2 are for informational purposes and would not affect your income tax return.