State tax filing

What happens to a number of users is that they assume that if TurboTax plugs in a number, it must be the right number and they just continue. In this case, you will see a screen (below) where the dollar amount of your W-2 is put into a box on a screen, and you are asked to change the number if necessary, because the number should be the amount of PFL that was NOT paid by the employer - this amount is removed from California income.

But frequently, users just sail on through this screen, indicating that the full W-2 amount was FPL, when it wasn't. Smart users like yourself catch this when they wonder why there CA refund is so large. Others don't catch it until the State of California Franchise Tax Board sends them a letter asking for tax back.

Please read this answer from previous years:

Paid Family Leave (PFL) is income that is taxable on the federal return but is non-taxable on the California state return if it

• is paid by the state's Employment Development Department (EDD) and appears on a 1099-G form –OR–
• is paid by an insurance company under a Voluntary Plan for Disability Insurance (VPDI) and reported on a W-2 from the insurance company.

To repeat: PFL is not included in your employer's regular W-2 but on a separate W-2 from the insurer.

Amounts called “PFL” that are paid by your employer and which appear on the W-2 from your employer (see last image below) are taxable both on the federal level and by the state of California.

When you mark a W-2 in TurboTax as being PFL, a screen about PFL appears in the California section of the interview.

**W-2 Interview**

**California Interview**

The amount of wages on the W-2 marked as PFL is displayed so you don't have to look it up, but you are asked enter the amount (if any) that was paid by an insurance company, and not your employer.

If none of the amount was paid by an insurance company but all of it was paid by your employer, then you must enter zero (0) in the wages box on this screen, because any amount reported by your employer in box 16 of a W-2 is considered by California as compensation for services or taxable fringe benefits.

Note that compensation for short-term disability, vacation days, sick leave, and other employer benefits are not considered to be tax-free PFL.

If so "so-called" Paid Family Leave was actually paid by the employer on the W-2, then do not check Paid Family Leave on the screen after you enter the W-2.