"In this situation, I was wondering why didn’t IHSS report the $12,000 in Box 12, Code II? Can I exclude the $12,000 from income and consider it for the EITC?"

They need to self certify with IHSS and then the W2 will come with zero in box 1 and the code II

Give them this link!  Its got a link to the self certification form they need to submit.

https://www.cdss.ca.gov/inforesources/ihss/live-in-provider-self-certification