On August 30, 2017, the New York State Department of Taxation and Finance issued a guidance (the “Tax Guidance”) on the tax implications of New York’s Paid Family Leave Law (“PFLL”). The key provisions of the Tax Guidance instruct as follows:
- Employers should deduct contributions from employees’ after-tax wages.
- Employers should report employee contributions on Form W-2, using Box 14 – “State Disability Insurance Taxes Withheld.”
- PFLL Benefits paid to employees will be taxable non-wage income that must be included in federal gross income.
- Taxes will not automatically be withheld from benefits; employees can request voluntary tax withholding.
- Benefits should be reported by the State Insurance Fund on Form 1099-G and by all other payers on Form 1099-MISC.
For more information regarding the PFLL, see our previous alerts:
- Governor Cuomo signs $15 Minimum Wage Plan and 12 Week Paid Family Leave Program into Law;
- New York State Workers’ Compensation Board’s Proposed Rule on the Paid Family Leave Law
- Final New York State Paid Family Leave Regulations Adopted.
Takeaway for Employers
While the Tax Guidance is a useful tool, we remind employers to consult with their tax advisors on the tax treatment of PFLL contributions. We further remind employers that although PFLL leave is not available until January 1, 2018, they may begin making deductions from employees immediately to help fund the cost of purchasing PFLL insurance which must be purchased prior to that date.
As we have previously advised, employers should review all applicable leave policies in anticipation of the January 1, 2018 effective date, such as FMLA, NYC Earned Sick Leave, disability leave, sick leave, military leave, and maternity/paternity leave policies to help ensure coordination with the PFLL. Employers should also consider adopting a system to appropriately track PFLL leave, particularly when PFLL overlaps with other required leave or is taken on an intermittent basis. Employers should also determine whether and when they will make deductions from employees, and, if so, should coordinate with their payroll department or outside payroll vendor.
* * *
If you have any questions about New York’s Paid Family Leave Law, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.