State-sponsored paid family and medical leave programs have sparked some confusion over federal tax implications. In response to a letter from nine governors in January 2024, the IRS recently issued Revenue Ruling 2025-4. Thirteen states and the District of Columbia have mandatory PFML programs, each with differing particulars. The IRS ruling referred specifically to a hypothetical state, referred to as State X . In this state, the PFML program offers wage replacement to workers who require time off due to personal or family medical conditions. All employers and employees within the state are obligated to contribute to the PFML Fund. The contribution rate in State X is 1% with the employer required to contribute 0.4% and allowed to withhold 0.6% from the employee’s wages. The employer, however, cannot include this withheld amount in the employee’s wage calculations.

Under the IRS ruling, employers are eligible to deduct their contributions against ordinary income as an excise tax. The employee contributions do not reduce their wage income, but employees can deduct the withheld amount as state income tax if they itemize, subject to deduction limits. Family leave benefits are taxable to the employee but are not considered wages and are therefore not subject to FICA or Medicare tax. However, medical leave benefits are taxable as wages if they are attributed to employer contribution.

The IRS ruling contains good news as well. Medical leave benefits that are attributed to employee contributions and employer pick-up are excluded from an employee’s federal gross income presenting an opportunity for tax refund. If a worker has collected from a state PFML program for personal medical leave and reported the full amount as taxable income, they may be eligible for a refund, subject to certain conditions.

With the implementation of Revenue Ruling 2025-4, it is crucial to understand how to contact relevant parties regarding your PFML. If you need to get a hold of Paid Family Leave or discuss possible refunds with a representative, eddcaller.com is a reliable tool to expedite the process. Whether you need to raise a query about PFML or any other State X’s employment issues, their website offers reliable and timely assistance. Their representatives can help guide you through the process, understand the Revenue Ruling in context, and explore possible refund opportunities. Eddcaller.com bridges the gap between you and the PFML ensuring that you understand and fully benefit from your state’s family leave programs.