Why did my california state tax return auto-populate a large amount into the PFL Income Received From Insurance Company, if I received a 1099-G. PFL was paid by employer.

[amymills21]

When entering my W-2 on my Federal taxes, I checked the Paid Family Leave box under uncommon situations.  I did receive PFL from my employer (not an insurance company).  When I got to my state (California) tax return, it auto-populated a large amount into the PFL Income Received From Insurance Company box.  I did not receive PFL from an insurance company.  If I erase the amount and make it zero, my state return drops more than $3000. Is this correct? Do I leave the amount that auto-populated in there or does it need to be changed to zero?

[BillM223]

Yes, you likely should enter zero in the box for PFL in the CA interview.

The number that is prepopulated there is from that W-2, and it is put there as an aid to you so you don't have to go back and look it up.

However, as you note, the instructions on that screen specifically state that PFL does not come from your employer (even though your employer may say it does), so if this is the case, enter zero.

If you misstate the PFL (which indeed makes it non-taxable in CA), then in about 4 years (based on my experience in handling these letters last year), you will receive a letter from the CA FTB asking for a sizable tax payment with penalty and interest.

Please read the following for a general explanation of PFL and California.

***

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 (see last image below) are taxable both on the federal level and by the state of California.

When you mark a W-2 in TurboTax as being PFL, a screen about PFL appears in the California section of the interview.

**W-2 Interview**

**California 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.

[kmjor2016]

I did not received a form from the insurance company, but am showing in Box 14 VPDI and there is an amount.  Does that amount go in the PFL box on the California return or does the difference between box 1 and box 16 on my W-2 go in that box.  

Thank you.

[KrisD15]

If the Paid Family Leave is reported in Box 14 of your W-2 and nowhere else, you don't even have to list it on the W-2 screen. 

Uncheck the box for uncommon situations on the Federal screens. 

This is for your information only. 

(You might use it if your are also self-employed and also claiming credits for sick and family leave.)

Since you did not get a 1099-G nor a separate W-2 for the paid leave, it should be included in Box 1 of your W-2 and taxed. 

Don't claim it as Paid Sick and Family Leave on your California return. 

[sorabhit]

Hi,

Thanks for all the answers. I am in similar situation but with an exception, so wanted to get your response on that.

Based on reading all the responses from TurboTax support team it seems like PFL pay is deductible in state iff:

1) We received 1099-G from state for PFL pay and

2) We received separate W2 from the insurance company with the PFL amount

If any of above doesn't apply then the amount list in employer W2 for PFL is taxable both by Federal and State.

However, I am observing few different things with my wife's W2 and would like to know the advice from TurboTax support team on it.

My wife received "Family Paid Leave" after pregnancy from the company. The amount $X in W2 is listed under Box14 code "FPL" for the total amount she received. Also her State wages, tips Box 16 in W2 has this $X subtracted but it is not subtracted from the Federal Wages,Tips mentioned in Box 1. This tells me $X is taxable under Federal but not under State. To confirm, this W2 is from her employer only. The total FPL amount which she received was actually received from a 3rd party company who did mention about the EDD program. We also received the letter from EDD about the benefit computation which she will be eligible for and her FML pay $X is according to that. My wife has not received any separate 1099-G form as well. So even though $X is included in her employer W2 it seems like this amount is deductible in state (considering we received  EDD letter for benefit computation and $X is deducted in W2 from state wages box). I wanted  to confirm if my understanding is correct here ? Please advice.

[AmyC]

Your w2 confirms that your PFL is not taxable in CA. Since CA begins with the federal AGI, you need to subtract the Paid Family Leave in the state section as described above. The authority is the state, Paid Family Leave | FTB.ca.gov.

@sorabhit