Paid Family and Medical Leave: IRS Update on W-2 Reporting
Employers in states that have paid family and medical leave programs will be relieved to know the IRS has extended its reporting deadline.
In fact, employers have an extra year to add information about this type of paid time off to Forms W-2.
In Notice 2026-6, the IRS extended the transition period that it’d earlier provided in Revenue Ruling 2025-4.
That means employers don’t have to include certain info related to their state’s paid family and medical leave programs on Form W-2 for calendar year 2026, just as they didn’t have to include the info for calendar year 2025.
These state programs provide wage replacement to workers for periods in which they need to take time off from work:
- Due to their own non-occupational injuries, illnesses or medical conditions, or
- To care for a family member due to the family member’s serious health condition or other prescribed circumstance.
Taxability of Paid Leave
In the recent notice, the IRS explained that amounts paid to an employee by a state as medical leave benefits that are attributable to the employer’s contribution under the state’s law are taxable for federal income tax and employment tax purposes.
They’re also considered third-party payments of sick pay, says the IRS.
Currently, 13 states have mandatory paid family and medical leave programs. They are:
- California
- Colorado
- Connecticut
- Delaware
- Maine
- Massachusetts
- Maryland
- Minnesota — state reporting soon to be combined with unemployment insurance
- New Jersey
- New York
- Oregon
- Rhode Island, and
- Washington — participation threshold lowered from 50 to 25 employees.
Free Training & Resources
Further Reading
IRS has announced some inflation-adjusted dollar amounts you’ll need if your benefits package includes tax-favored health plans. F...
Year-end may seem a long way off, but some changes related to Form W-2 may require your attention now. For example, the Social Security...
When a natural disaster hits, you’ll be focused on ensuring your people and property are safe. Details like tax deadlines may not be ...
Among the many provisions of the Secure 2.0 Act, several deal with the paperwork responsibilities that fall on retirement plans. The Sec...
A California carwash has agreed to a $1.2M settlement to resolve wage theft allegations, according to the California Labor Commissioner’s...
IRS released regs at the end of November, leaving retirement plan sponsors with just over a month to get their 401(k) plans up to speed. ...