How to enter CT PFL 1099G that was for medical leave and exclude from income

Forum|Forum|1 year ago
February 15, 2025
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Working on my sons return. He works for Electric Boat in CT and his 2024 W2 shows that they withheld 0.5% of his social security wages to CT PFL. This indicates to me after tax payment. He received a 1099G from the Continental American Insurance Company DBA Aflac Group for $6,213 reported in Box 1 “Unemployment Compensation” which was actually for medical leave paid due to a temporary illness. Originally, he assumed that it would be taxable so he had them withhold federal and state tax.

On January 15, 2025 the IRS provided guidance on this topic Rev. Rul. 2025-4.

https://www.irs.gov/newsroom/irs-issues-guidance-for-the-district-of-columbia-and-states-that-have-paid-family-and-medical-leave-programs

“An employee who receives state paid medical leave payments must include the amount attributable to the employer portion of contributions in the employee’s gross income. This latter amount also is subject both to the employer’s and employee’s shares of Social Security and Medicare taxes. The amount attributable to the employee’s portion of the contributions is excluded from the employee’s gross income, and this amount is not subject to Social Security or Medicare taxes.”

This indicates to me that since the premiums were withheld from his pay after tax and since the reason for his leave was medical hat he should not include this 1099G in his income.

When entering the 1099G there is a question “Is this paid family leave or state disability insurance payment”. I selected yes as state disability insurance payment but it still includes it as income.

Questions:

Is there a way to identify the CT Medical leave amount as medical leave payment and have it excluded from income? If I enter the $6,213 in 1099G box 1 “Unemployment Compensation” and the federal and state withholding amounts there is no way that I can find in turbo tax to flag it as non-taxable medical leave.

Is there some other way to enter the 1099G for the purpose of getting the withheld federal and state taxes back without turbo tax recognizing the $6,213 of medical leave payment as income?

AmyC

No and no. Let's go through the IRS link.

Under multiple scenarios, it says: An employee who receives state paid medical leave payments must include the amount attributable to the employer portion of contributions in the employee’s gross income.

This translates to:

Employee and employer both pay part of the premium. The portion paid by the employer is the % taxable income to employee when the insurance is received. This portion varies by state and sometimes employer. If your son paid 5% of the premium, then 95% of the income is taxable.

Now the question is what % is taxable. The IRS link says: The amount attributable to the employee’s portion of the contributions is excluded from the employee’s gross income,

This translates to:

This means the employee's nontaxable part is not in the form since it isn't taxable. The entire amount shown on the form is taxable income.

Conclusion: the entire amount on the form is taxable income federal and state.

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TrafcoAuthor

I’m sorry if I was not clear. The entire premium for CT FML is 0.5% or one half percent of wages. The employer did not pay any of this amount. It was all withheld from the employees pay 100% in after tax dollars.

Looking at the IRS link under multiple scenarios it also says: "The amount attributable to the employee’s portion of the contributions is excluded from the employee’s gross income, and this amount is not subject to Social Security or Medicare taxes."

This means that if the employee paid 100% the premium then it is not taxable. Does it not?

AmyC

Thank you! Let's dig deeper because this is more complicated in reality.

The entire amount is employee paid and therefore sounds like it is not taxable. However,

CT PFL is not the same as FMLA. The CT PFL is considered to be like short and long term disability payments, which are considered by the IRS to be taxable wages subject to FICA.
See CT Frequently Asked Questions
While you are there, scroll on down to the tax section. It states: the CT Paid Leave Authority has directed its claims administrator to issue 1099-Gs to everyone who received benefits from the program, regardless of the claim reason. These 1099-Gs will be issued at the beginning of the new year for benefits paid in the prior year.

This has become a gray area with CT unable to make a tax determination.

Let's go back to the IRS. Life insurance & disability insurance proceeds states: You must include in your income sick pay from any of the following:

A welfare fund
A state sickness or disability fund
An association of employers or employees
An insurance company, if your employer paid for the plan

Which means currently, it is taxable and that could change due to the employee funding. I recommend filing the income and watching to see if you can amend for a refund later.

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