Before you amend your return, I want to explore a common situation in which California taxpayers try to claim Paid Family Leave on a W-2 when they are, in fact, not eligible to. The problem is that what is commonly called "paid family leave" is not PFL under the tax code of the state of California when paid by the employer.
*** PFL FAQ ***
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 are taxable both on the federal level and by the state of California.
When you mark W-2 in TurboTax as being PFL, a screen about PFL appears in the California section of the 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.
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Is it possible that this FAQ applies to your situation? If so, you do not want to amend your return to claim your W-2 as PFL.
