Paid FamilyMedical Leave Taxability in MA

[ruthc]

I have been researching this subject for a while without any confidence on how to handle for taxes. Client received paid family medical leave from MA for having a heart operation in 2021. I am getting more confused on whether to tax the amount or not. After reading IRS articles, I feel the amount is taxable as unemployment for federal taxes. He received a 1099-G from the employer who listed the amount in box 1 as Paid Family Medical Leave, and the amount does automatically transfer to Form 1040, Schedule 1 for unemployment. For the MA return I have a problem. I did read the MA instructions and also called the DOR and was told they can't give any info on taxing/non-taxing on the amount because they haven't gotten any tax instructions from the IRS after waiting a year. They could not/and would not say either way how to handle. The amount did flow to unemployment on MA Form 1. However, it really isn't unemployment. MA Schedule X, line 5 is the place where PFML is supposed to go if taxable. But of course, because it is listed as unemployment on Form 1040, it flows to unemployment on the MA return, not on the Schedule X, line 5 PFML line.

Has anyone doing a MA return run into this issue? And if so could you share how you handled it? I don't know why this issue wasn't fixed by MA by now, but knowing how the IRS is now, who knows what is going to happen. Thanks for all responses!!!!!!

[BOB W]

Ruth, I would call your tax software company, they may not be handling correctly.

[FEDUKE404]

I can't help you on MA, but my software has a different input screen for a 1099-G for state income tax refund versus a 1099-G for unemployment payments.
For the latter, an entry in Box 1 automatically flows to Schedule 1, line 7.

[ruthc]

Thanks for those responses. I did plan on calling the software company this morning. I will also ask about how the amount flows to the state schedules. I appreciate the help!!!

[ruthc]

I can't help you on MA, but my software has a different input screen for a 1099-G for state income tax refund versus a 1099-G for unemployment payments.
For the latter, an entry in Box 1 automatically flows to Schedule 1, line 7.

Yes, my software does that same transfer to Form 1040, Schedule 1, line 7 unemployment (even though the description on the line 1 on the 1099G is "Paid FML". I have no problem with that. That amount gets transferred to the line for unemployment on the state return too even though it really was for "FML". Maybe I am overthinking the state return. Maybe it supposed to go under unemployment like the federal return even though the state return has another line for FML Thanks again. Haven't been able to get through to the software company, but I am going to keep trying and get it resolved.

[ATSMAN]

IRS has yet to determine in writing if the MA Paid Family Leave benefit is non taxable. The opinion of most learned accountants is that unless expressly stated that it is non taxable it is taxable for both Federal and MA income tax purpose. MA DOR is silent on this issue also. So if your tax software inputs that amount under unemployment benefits because the source document is 1099-G it should calculate it correctly for both Federal and state tax purpose.

[ruthc]

IRS has yet to determine in writing if the MA Paid Family Leave benefit is non taxable. The opinion of most learned accountants is that unless expressly stated that it is non taxable it is taxable for both Federal and MA income tax purpose. MA DOR is silent on this issue also. So if your tax software inputs that amount under unemployment benefits because the source document is 1099-G it should calculate it correctly for both Federal and state tax purpose.

Thanks for the info. What also bothers me is that the 1099-G that my client received has box 1 listed as "Paid Family Medical Leave Benefit" NOT "Unemployment Compensation" like other 1099-G's I have received. I never got one with FMLA listed in box 1. The form did have a note with the form why they issued the form the way they did (because no guidance from the IRS yet) . The other concern is that it does flow to the IRS schedule 1 under "unemployment". It also flows to the MA return under "unemployment", even though MA also has a schedule with a line for FMLA.

After checking a couple other places, I am leaning toward handling it the exact way you noted noted above....I will let the software have the amount flow to the unemployment lines on both returns. The client can afford to pay the tax. So if it needs to be changed later, at least they won't have any penalty for not paying the total tax due. I like it when they get a refund instead of them getting additional due taxes PLUS any penalty or interest for not paying. I will give them the choice after explaining it to them.