Paid medical leave may be reported to a taxpayer on one of three possible forms, depending on how the benefits were administered:
- W‑2 — employer‑paid or state‑withheld PFML contributions/benefits
- 1099‑G — state PFML program benefits
- 1099‑MISC — private disability insurers (non‑state PFML)
Under new IRS guidance, family leave benefits are always taxable, while medical leave benefits are only partially taxable depending on who paid the PFML contributions.
🧩 1. Paid Medical Leave Reported on a W‑2
🧾 Where to enter in the program
- Federal
- Income
- W‑2
Taxability
- W‑2 Box 1 already includes taxable paid leave amounts, including PFML contributions withheld from employees.
- Employee PFML contributions (required payroll withholding):
- Must be included in taxable wages (Box 1).
- Subject to federal income tax, Social Security, Medicare, and unemployment taxes.
- Employer “pick‑up” contributions (employer pays employee’s required share):
- Must be treated as taxable wages to the employee.
Box 14 Information
Box 14 entries (PFML, PFL, FMLA, CA SDI, NY PFL, etc.) remain informational only, unless a state return specifically uses the information (e.g., CA SDI deduction).
🧩 2. Paid Medical Leave Reported on a 1099‑G
(State Paid Family & Medical Leave Programs)
Many state PFML programs (e.g., WA, MA, NY, OR, RI) issue Form 1099‑G for benefits paid directly to the taxpayer.
🧾 Where to enter in the program
The program does not have a 1099-G box 10 entry. Instead, follow these steps:
- Federal
- Less Common Income
- Other Income
- Other Income
Taxability
A. Family Leave Benefits
Family leave benefits are always taxable federal income.
States must also issue a Form 1099 for PFML benefits that exceed $600
B. Medical Leave Benefits (Rewritten Without Table)
Medical leave benefits may be partially taxable depending on who funded the PFML contributions.
Under IRS Rev. Rul. 2025‑4, the portion of medical leave benefits that comes from employer-paid PFML contributions must be included in taxable income, because employer-funded amounts are treated as taxable wage replacement.
In contrast, the portion of the benefit that results from employee PFML contributions is not taxable, provided the employee’s contributions were made with after‑tax dollars. This means that only the employer‑funded share of medical leave benefits is taxable, while the employee-funded share is excluded from federal income.
🧩 3. Paid Medical Leave Reported on a 1099‑MISC
(Used by private or third‑party disability insurance companies)
🧾 Where to enter in the program
- Federal
- Income
- 1099‑MISC
- Box 3
- Other Income
Taxability
- Most third‑party disability benefits are taxable wage replacement income.
- Rare exception:
If the taxpayer paid 100% of premiums using after‑tax dollars, the resulting disability benefits may be non‑taxable under IRC §§104–105.
State PFML Program Note (Massachusetts and other PFML states)
Some states operate Paid Family and Medical Leave (PFML) programs. These benefits are not the same as employer‑provided medical leave.
- In Massachusetts for 2026, medical leave benefits paid to employees of employers with fewer than 25 employees are not taxable.
- These rules apply only to state PFML programs, not to employer‑provided paid medical leave.
- If the customer receives a Form 1099‑G for PFML benefits that are not taxable, do not enter them on the return.