I wanted to share some real-world experience regarding the taxability of WA State Paid Family Leave, as there seems to be confusion on this matter. To clarify, I am specifically referring to the family leave component, not the medical leave component.
Here’s what happened in my case:
- In 2022, I received a 1099 from the state for WA family leave and, due to the uncertainty over whether it was taxable or not, I chose not to report it on my taxes.
- In 2024, I received a CP2000 letter from the IRS stating that I owed nearly $8,000 in taxes, interest, and penalties for unpaid family leave taxes.
- I disputed the issue by submitting the IRS paperwork they sent me, along with a letter explaining that this was Paid Family Leave. I also included a copy of the official document provided by WA State that outlines the uncertain tax treatment of this leave (link: What to know about your 1099-G).
- Five months later, I received a notice from the IRS confirming that the documentation I provided had resolved the discrepancy and that my case was closed with no taxes owed.
I hope this helps clear up some of the confusion and provides insight into how the IRS may handle such situations.
