I am an Oregon State resident and work for a company that created a PFML plan that combines with their short-term disability plan. On my payroll check, the company shows PFML as income and I am deducted after-tax PFML for the same amount. In addition, I have after-tax deductions for short-term disability. I went on maternity leave in 2024 and received 12 weeks of Maternity leave (payable at 75%) and 14 weeks of bonding via short-term disability (payable at 100%). I received two W2's from the third party company. On the first one the wages in Box 1 were zero, Box 12 had a code J, and Box 13 "third-party sick pay" was checked. I know that is non-taxable and did not report this W2 in Turbo Tax. However, the second W2 had wages in Box 1 (for the 14 weeks), federal income tax withheld, no state income tax withheld, and Box 13 had third-party sick pay checked. When I entered the W2 into Turbo Tax the income for the 14 weeks flowed into income on the Oregon state income tax. When I asked the third party company about it they said they did not withhold state income tax because they said PFL (paid family leave) is not taxable by the state. This seems right to me since I have short-term disability deducted as after-tax; however, Oregon is reporting it as income in Turbo Tax. Is this correct? And if not, how do I adjust the state income on Oregon's income tax return?
