The IRS has announced new tax rules that will affect employers participating in Massachusetts’ Paid Family and Medical Leave (PFML) program.
Starting January 1, 2026, the Department of Family and Medical Leave (DFML) and employers who take part in the state’s PFML program will need to follow updated IRS guidelines on how certain taxes are handled and reported.
What Massachusetts Employers Need to Know
- Certain medical leave benefits will now be treated like wages.
Beginning January 1, 2026, portions of medical leave benefits will be classified as third-party sick pay (wages) for tax purposes. - Employer taxes will apply to some benefits.
Employers required to make medical leave contributions must pay the employer portion of FICA (Social Security and Medicare) and FUTA (federal unemployment) taxes on eligible medical leave benefits paid to employees on or after January 1, 2026. Employers will also need to report the taxable portion of those benefits on employees’ W-2 forms. - Daily Sick Pay Reports will be available.
The DFML will provide employers with a Daily Sick Pay Report through the employer portal. This report outlines the amount of medical leave pay distributed and which taxes were withheld. While the DFML won’t calculate how much tax an employer owes, the report will include all the data needed to handle any taxes the IRS considers “taxable third-party sick pay.” - Employers will need DFML portal access.
To access this tax information, employers must log in to their DFML employer portal account. This is the same system used for Massachusetts unemployment filings. - No change to family leave benefits.
Family leave benefits will continue to be reported to employees and the IRS on Form 1099-G, and employees may still choose whether to have state and federal income taxes withheld on their PFML benefits.
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