How does TurboTax treat Washington state Paid Family and Medical Leave?

[lesiney]

@MaryK4 

Thank you for your response. I did not receive FFCRA Leave. I received the Paid Family Medical Leave with supplementation from my employer (I had a baby). However, the ESD allowed my employer to administer the payments directly instead of having them issue the payments (this is an option given by the ESD to employers). 

[AmyC]

@lesiney Ca website for Paid Family Leave | FTB.ca.gov explains the income is taxable to the federal and to adjust it out/off using  unemployment compensation on the CA.

You do need to report the income. Since you did not receive paperwork, you can only use what information you do have, bank deposits, etc to calculate the value. Enter it as other income, as explained earlier in the thread.

[purkeymonie]

Is paid family leave will be exempt from tax up at $10,200 like unemployment benefit ? 

[DaveF1006]

Yes, paid family leave will be exempt from tax up at $10,200 like the unemployment benefit.

[kj1097]

Does anybody know if they have determined whether to tax the WA PFML for the medical portion.  The details are in this thread, but WA State sends out a 1099-G only for paid FAMILY leave, not MEDICAL leave because the IRS will not tell them (or anybody) if it will be taxable.  I collected paid medical leave in 2021 and I am trying to determine if I should report it as other income and pay FWH on it or not.  Couple of questions I have may help me out:

• WA state has indicated they will not send out a 1099-G for paid medical leave, does that mean they are not reporting it to the IRS?
• If I do not report it and it turns out to be taxable, will there still be fines/penalties even though the only reason I would not report it is because they will not tell us whether it is taxable or not?  Is there is time limit for them to decide, i.e. after 3 years it is too late for them to go back and try to collect it?
• If I do report it and they decide it is not taxable, will I need to file an amended return to get the money back?

I appreciate any advice or from people that may have had this same situation last year and how you handled it.  Very confusing when the IRS will not say if it is taxable or not.

Thanks!

[pigwidgin]

@kj1097 I am the person who posted the original question and I can tell you what we ended up doing.  After listening to what folks had to say here and also talking with an experienced CPA, we went ahead and reported it as other income and paid the taxes on it.  We were advised there could be penalties if they do decide it's taxable and we didn't count it as income.  If they do come out and say it's not taxable, then we will have to file an amended return to get the money back.  I'm not sure what happens if 3 years go by with still no decision, if we can get the taxes we paid on it back or not at that point.  Will have to consult a tax expert if and when the time comes.  It's disappointing that there is still no decision one way or the other on the medical leave tax status.  To my knowledge, there is no decision yet and I'd be happy to hear if I'm wrong about that.

[Vanessa A]

Washington State said they will issue a 1099 G to everyone who has received Paid Leave.

You will need to include this paid leave on your tax return if you file prior to the IRS issuing guidance on this topic.  If you file prior to them making their final decision and include it and pay taxes on it then no you would not have any type of penalty. You may get a refund at a later date for the overpayment.  If you do not include it and they decide it is taxable, you would be subject to penalty for underpayment. 

So you do need to include it in your return when you receive it. 

[pigwidgin]

@Vanessa A  Curious if they do decide the medical leave portion is not taxable and you've already paid taxes on it in a prior year as we have, does the IRS have the ability to root out who needlessly paid taxes and automatically issue refunds or is it up to the tax payer to file an amended return to get the refund?  Thanks!

[Vanessa A]

Yes, it would probably handled similar to last years Unemployment Benefits being tax free for 2020.  The IRS went through and issued refunds for those who filed before the decision and paid taxes on their unemployment.  

It may take a while, but depending on your tax situation, it may be worth including the extra income and waiting for a refund later or it may be better to wait until closer to the tax deadline to give them a chance to make the decision. 

[pigwidgin]

@Vanessa A   Great, thank you!

[kj1097]

I only collected MEDICAL leave, not FAMILY leave and WA State is only issuing 1099-G's for FAMILY leave.  They specifically say they will NOT issue one for medical leave.

Thank you both for responding.  I'll just report it as other income and pay the taxes as I also think they will eventually classify it as taxable.

[SLitt]

There's a problem. WA State is NOT sending 1099-G for the medical leave portion of PFML (Paid Family Medical Leave). 

Per the PFML site:

1) they don't know if PFML is taxable:

https://paidleave.wa.gov/question/do-i-have-to-pay-taxes-on-[product key removed]its/ 

AND

2) they are only sending 1099-G's to those people who took paid FAMILY leave:

https://paid leave.wa.gov/help-center/individuals-and-families/payments/

then click on question "I want a 1099-G for medical leave benefits. How do I request one?"

answer is: "We will not be providing 1099-G forms for medical leave benefits."

[kj1097]

@SLitt I made the assumption that even the medical leave will eventually be considered taxable, so entered the amount of paid MEDICAL leave that I received in 2021 in the Other Income, taxable Income section and described it as WA State Paid Medical Leave when I filed this year.  Because they will not send a 1099-G, that was the only place to report it.  I figured I would play it safe so that when they eventually say it is taxable, I would not incur any penalties or fines for not claiming it.  It sucks that the IRS will not give an answer, so I erred on the side of caution.

[m2s0l3mvos-]

The TurboTax user interface specifies family leave, rather than medical leave. When I called talked to TurboTax support, they pointed that out.

[Wardajamilla]

So the Wapfmla says they will not be sending 1099 forms for medical leave in 2022 and says we need to ask tax professional on how this should be handled for 2022 tax year? Can you assist with guidance on this?