Taxability of Family Leave Benefits

There is more news about the new Family Leave Program in New York.  New York State has just issued Notice N-17-12, New York State’s New Paid Family Leave Program.  The notice indicates that, once the new program becomes effective in 2018, benefits paid to employees while they are on family leave will be treated as nonwage taxable income to the employees.  Generally, such benefits will be reported to the employees by the disability insurance carrier used by the employer.

Employers are required to add family leave coverage to their existing disability insurance policies as of January 1, 2018.  If the employer uses the New York State Insurance Fund for its disability coverage, employees who receive benefits from the new program will receive a Form 1099-G to report the related income.  If the employer uses another disability carrier, employees who receive benefits from the new program will receive a Form 1099-MISC to report the related income.  Either way, these benefits will be included in the taxable income of such employees.

We have discussed the new family leave coverage in previous posts on August 17, 2017 and June 29, 2017.