Paid Leave Oregon - how to deduct employee contributions from benefits for paid medical leave???

[Gimel]

My wife's paycheck shows she contributed more than $1K to Oregon's Paid Leave last year. She also took some medical leave and received a 1099-MISC that reflected the paid leave as Other income and the state and federal withholding. TurboTax instructs us on how to input the 1099 info but i can't figure out where we can input the $1K contributions to Paid Leave that were withheld from her paycheck. That's gotta count for something as Oregon's Paid Leave requires employees to contribute 60 percent to the program.

I see the IRS recently issued a ruling on this -- it can't be possible that they we would not get to claim that contribution against the benefit in some way.

IRS: Amounts paid to employees as medical leave benefits that are attributable to the employee’s contribution (including employer pick-up of employee contributions) are excluded from the employee’s gross income under § 104(a)(3) and are neither wages for federal employment tax purposes nor treated as sick pay.

The 1099-MISC is clearly counting the money she received in medical leave from the state as income. 

Please please help me figure this one out!

[AmyC · Accepted solution]

You may need to adjust the federal first due to a new ruling in January.

Benefits from Paid Leave are taxable according to the percentage paid by the employer. Your w2 should not include the portion you paid for federal or state. The IRS announced it in January and the forms may have already been created, with the full amount. See The IRS guidance.

Your employer paid the 40%. You state that you had money withheld and paid 60 % -that part of the amount is not taxable. 

You may need a corrected w2. If you can't get a corrected w2, you will need to subtract the 60% you paid.

The same is true for OR taxability. See Paid Leave Taxability. OR starts with the federal AGI so another adjustment is not needed.

Follow these steps to enter the nontaxable income on your federal return:

1. go to the federal income section
2. scroll to the bottom
3. Miscellaneous Income, 1099-A, 1099-C, Start
4. Scroll to the bottom
5. Other reportable income, Start
6. Other taxable income?
7. Select YES
8. Description  - nontaxable employee paid share of OR PFL
9. Amount, enter your amount with a negative sign in front
10. Continue

[Gimel]

Thanks for your help on this. My wife's employer didn't respond to the w2 question so followed your advice to note on our own