IRS Ruling Clarifies Employment Tax Implications of Paid Family and Medical Leave Programs
The IRS’s recently released Revenue Ruling 2025-4 provides significant guidance on the employment tax treatment of contributions to and benefits paid under state paid family and medical leave (PFML) programs . This has been an area of concern as states have enacted various paid leave laws without providing guidance about how to tax such benefits. The revenue ruling clarifies key points and highlights important distinctions among the treatment of contributions and benefits for FICA, FUTA, and income tax withholding purposes. These distinctions are significant for employers and require careful attention to ensure compliance with federal tax and reporting requirements. Overview of the Ruling Rev. Rul. 2025-4 clarifies how contributions and benefits under state PFML programs interact with federal employment taxes: Contributions to PFML Programs Employer Contributions : Contributions made by employers to a state PFML program are generally excluded from an employee’s gros...