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Returning Member

Paid Family Leave Income from Company and Short Term Disability Leave from a Third Party Insurance

Hi,  I got the short term disability leave benefit and paid family leave benefit from EDD in California.  Besides the short term disability payment from the EDD, I got additional short term disability benefit from a third party insurance company contracted with my company.  I received a W2 from this insurance company in 2019. Is it considered as my normal income and do I need to pay both federal and state tax for this W2?  Turbo tax only asks user to input the PFL income from an insurance company but does not ask for SDI benefit from an insurance company


For paid family leave, besides the PFL money from California EDD, the rest is compensated by my company and is included in my company's income.  Is it exempt from California State tax?  There is no option in Turbo Tax to enter the PFL income from the company?


In my company's W2 Box 14, there is "SDI" money listed? Is it used for any tax calculation?  Why is my "social security wages" in Box 3 is higher than the "Wages" in box 1?  Is the income in Box 1 used to calculate tax?




2 Replies
Expert Alumni

Paid Family Leave Income from Company and Short Term Disability Leave from a Third Party Insurance

Yes, you pay normal taxes on the disability income that is reported to you on Form W-2


Enter the insurance company W-2 in the same manner as your other W-2 income.   The TurboTax question for this form is "Do you have another W-2 to enter?" It is accounted for here, and not in the section where your state PFL is entered, as for tax purposes they are two different things.  


Box 14 is just an informational box - it is simply a notation letting you know that there is short-term disability income.  Box 1 is the number used to calculate your taxable income.  It often differs from Box 3 due to allowances for certain deductions from your normal taxable income that aren't deductible when determining the social security tax.


On your company's W-2 this is likely attributable to deductible items such as 401k deductions or other pre-tax deductions and is common. It could also be for some portion of your disability pay that was paid by your company if it was paid under a tax-free arrangement.  t is difficult to know the exact reason for the difference without more information - but those items are frequently (but not always) also in box 12. 


The amount paid directly by your company, if exempt from any tax, is adjusted for on the W-2 itself.  You don't need to adjust that further.  Only the amount specifically paid as PFL is treated differently and entered as such in the program.  



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Returning Member

Paid Family Leave Income from Company and Short Term Disability Leave from a Third Party Insurance

Thank you Susan for the detailed answers!


Why is not the disability leave money from the third insurance company exempt from the state tax just like the paid family leave money from the insurance company?


Does the income in W2 include the money from RSU?  I know that federal and state income taxes are deducted when the RSU is vested.  Will the tax withheld from the RSU be included in the federal and state tax withheld in the W2?


How come checking the "Paid Family Leave" box after importing W2 does not make a difference to state or federal income tax?



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