The FAMLI Program recently received some new guidance from the Colorado Department of Revenue. Here is what you need to know:
- FAMLI premiums should be considered post-tax deductions that do not reduce an employee’s taxable income.
- Employers should report such deductions on IRS form W-2 in Box 14, and list “FAMLI” as the label.
- The FAMLI Division will issue IRS form 1099-G to each employee who receives FAMLI benefits, and the benefits paid will be reported in Box 1, which is labeled “unemployment compensation.” Per IRS instructions, this box is also used for governmental paid family leave programs.
- The FAMLI Act makes it clear that benefits are not subject to state income tax. In the coming months, the Colorado Department of Revenue will update its website to provide Coloradans with guidance regarding the tax treatment of FAMLI benefits.
The FAMLI Act makes it clear that FAMLI benefits are not subject to state income tax, however, the IRS has not made a clear decision as to whether or not FAMLI benefits are subject to federal income tax, and the FAMLI Division can’t advise individuals on their tax compliance. Therefore, we recommend that employees consult a tax professional for advice.