Employer PFML pickup tax calculations
The IRS issued Rev Rule 2025-4, offering guidance on federal income and employment tax treatment for state paid family and medical leave (PFML) programs. It clarifies reporting requirements and tax implications for employers and employees in states with mandatory PFML.
In particular, employer pickup contributions are considered additional compensation to the employee and required to be included in the employee’s Federal gross income as wages.
To comply with the ruling effective January 1, 2026, clients in the 7 states letting employers pay the full employee PFML share will have an additional tax item called
<State Name> FLI (ER Paid)
. This tax item will show in the Taxes section at , and in the Employer Taxes section of payroll check data entry screens.The 7 states include:
- Delaware
- Colorado
- Maine
- Massachusetts
- Minnesota
- Oregon
- Washington
It's possible more states will be added in the future.
Dates of application
- Checks dated 2025 or earlier:The FLI (ER Paid) employer tax item may show but won't calculate (amount will be 0.00).
- Checks dated 2026 or later:The FLI (ER Paid) employer tax item will show and calculate based on current client settings.
