@pigwidgin Yeah, I agree that the main question is where / how to report it... However the problem is that state programs have been set up in the past 5 years without any guidance from IRS. If you REALLY want your eyes to go crooked, you can try following this summary of the issue: https://taxnews.ey.com/news/2020-0128-state-laws-requiring-paid-family-and-med[product key removed]e...
Which includes such scintillating commentary as
" If the benefit is received for leave taken for one's own serious health condition, the benefit would be taxed in the same manner as a disability benefit. That is, the exclusion provided under IRC Section 104 for amounts received through accident or health insurance would exclude the benefit from the recipient's income to the extent it was attributable to an employee's post-tax contributions. If the benefit were funded with employer dollars (either as pre-tax salary reduction or otherwise), IRC Section 104 would not exclude the income. To further complicate the treatment of PFML payments under IRC Section 104, the taxation of disability benefits for an arrangement funded by a mix of employer and employee dollars is particularly complex."
Because WA's system is funded by both employer and employee, and the state doesn't break down those costs fractionally for who is contributing how much to the family leave vs sick leave portion, it seems that "particularly complex" in this case just means it hasn't been done by any state because a state-run mutual insurance was not considered by tax law / IRS guidance. So this could also mean that you don't have to report it... Seems like it's damned if you do, damned if you don't.
