First, make sure your "hanging indent" settings are correct.
Sometimes Word will do strange things - like indenting your whole citation instead of just indenting everything from the second line on. To force Word to indent, you can sometimes put the cursor in front of what you want indented and hit "Enter". Instead of moving the text to the next line, it will appear that nothing has happened (but it has!). You can also click on the little arrow beside the word paragraph on the home tab in Word. A box will appear. Under Indentation click on Special and choose hanging (make sure you've highlighted what you citation you want indented this way). Now try to indent and it should work.
