The IRS has stated that "Qualified family leave wages for purposes of the credit are calculated without regard to federal taxes imposed on or withheld from the wages, including the employee’s share of social security taxes, the employee’s and Eligible Employer’s shares of Medicare tax, and federal income taxes required to be withheld."
However, the IRS has yet to confirm whether they will consider Washington State's Paid Family and Medical Leave a taxable qualified family leave. This is why Washington state decided only to send 1099's out for family leave. The IRS has stated that family leave is considered taxable in the past.
As this needs to be clarified, the state determined they would issue the 1099s based on how the IRS has handled family leave in the past versus having to make corrections once the IRS determines they will decide on whether they consider the funds taxable.
If you include the income on your return and the IRS determines the funds will not be taxable, you can file an amended return to correct 1099 that was issued.
@joshks
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