Paid Family Leave

[JC192]

Hello, I recently filed my taxes and I noticed that my CA state tax return was higher than normal. When I reviewed my forms I saw that my whole income was inputted for paid family leave and is being subtracted from me and my wife’s total income. The total amount I was paid from the state for PFL was approximately $5,000 which is on my 1099-G form. What number should have been inputted there and how do I fix this issue since I already my taxes?

[DaveF1006 · Accepted solution]

The amount of $5000 should appear in the box. You will need to amend your Ca return to correct it. I notice there is a check mark confirming your PPL amount.  You may need to go back and uncheck that box and then put in the right amount, if the program will allow you to. Also check your original 1099G entry in your federal program for the amount recorded for Paid Family Leave. 

I do not know how the mistake could have happened unless you made additional entries in your state return. If this happened,  it was not needed because the information will flow from the federal return without you needing to make additional entries. Now to amend.

To amend your return using Turbo Tax Online.

1. Log into Turbo Tax
2. Select Scroll down Your tax returns & documents in your landing page.
3. Select Amend (change) 2023 return. 

To amend using the Desktop Software, go to:
 

1. Federal Taxes
2. Other Tax Situations>other tax forms
3. Amend a return

You will need to wait until your California return has been accepted before you amend. Also when you begin the amendment process, remove the check mark underneath PFL in your CA Adjustment worksheets, check the original entry in your federal return, and check to see if you made extraneous entries in your Ca state return. If the error persists, you may need to delete your California State Return and then restart again, especially if your 1099 G in your federal return is correct.

After completing the steps and the correct amount appears in your Schedule CA, you may file your amendment.  When you file, make sure you indicate that you wish to mail your federal return but wish to efile your Ca State Return. Your issue is not with the IRS but with the State of Ca, unless your original entry in your federal return was incorrect regarding the 1099 G entry.  Make sense?

Reach back to us if you have any additional issues but as I mention above, you will need to wait until your Ca return is accepted before amending.

[jrojas93]

Does TurboTax have a bug? I had this exact issue occur for me (I caught it, paused, and now waiting to get clarification). TurboTax automatically input all my other income similar to the individual who submitted this post in this box (which estimated a much larger CA state return amount than expected). I noticed how large it was and removed it and paused. It states not to input 1099 income so I am excluding that. But now I need to know what amount to input here. Separate from my 1099 (which paid me somewhere around 60% of my income), my employer provided me "leave pay" on my pay-slip which gave me 100% of my normal income while on paid family leave; however, this amount is no where on my W2 so confused what to correctly place in this box.

[BillM223]

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.