Tax Implications of Payments Received under the Washington Paid Family Medical Leave Program
Since its effective date of January 1, 2020, the Washington Paid Family Medical Leave Program (“PFML”) has provided qualified employees paid time off if such employees miss work due to serious health conditions, needing to care for a family member or new child, or certain military-related events.
If a worker received paid leave under the PFML during tax year 2020, the worker has received or should be receiving a Form 1099-G, Certain Government Payments (“Form 1099-G”) from the Washington Employment Security Department for tax year 2020. The Form 1099-G will have:
- The Employment Security Department as the Payer (including the Department’s contact information and tax identification number);
- The worker’s name, SSN, and address as the Payee (including the worker’s Paid Leave account number); and
- The amount of paid family leave benefits the employee received during tax year 2020.
In making payments under the PFML, the Employment Security Department will not withhold any federal taxes. This does not mean, however, that workers will receive such benefits tax-free. That question is yet to be answered. In fact, the Employment Security Department is still waiting for a response from the Internal Revenue Service (“IRS”) regarding the taxability of such payments.
While the question on these specific facts remains open, similar types of benefit payments are subject to federal income tax. For example, unemployment compensation is taxable income and must be reported on an individual’s income tax return. Moreover, the IRS considers other benefits, including any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security Act, to be taxable. Accordingly, such workers should be aware that benefits received under the PFML may be deemed taxable by the IRS. As a result, affected workers should consult their tax advisors regarding the appropriate tax reporting for the receipt of PFML payments.
We continue to follow this issue, and plan to update this summary if the IRS responds to the Employment Security Department’s inquiry. In the meantime, if you have any questions or comments about the PFML, please do not hesitate to contact John Way, Alee Soleimanpour, Stephanie Berntsen, or Farron Curry.
This article summarizes aspects of the law relevant to the Washington Paid Family Medical Leave Program; it does not constitute legal advice. For legal advice for your situation, you should contact an attorney.
- Stephanie BerntsenShareholder
- Farron CurryShareholder
- Alee SoleimanpourAssociate
- M. John WayShareholder