1099-MISC for Colorado FAMLI Parental Leave

Question

Because parental leave at my company was managed by a claims administrator instead of the state, I was issued a 1099-MISC instead of a 1099-G. FAMLI leave in Colorado is not taxable at the state level. When I enter the 1099-MISC into FreeTaxUSA, it forces me to select it as income, choosing between Other Income (Form 1040), Business Income (Schedule C), Farm Income (Schedule F), or Farm Rental Income (Form 4835). I cannot skip this step. Selecting "Other Income" suddenly takes me from receiving a refund from CO to owing the state.

Is there a way to enter a 1099-MISC in FreeTaxUSA that will process it properly for Colorado FAMLI leave (as non-taxable by state)?

CoryF · Answer

Thank you for joining our community with this response, Nb24.

You are correct, the CO PFL or FAMLI benefits are not taxable at the CA state level. Please see this article from CA. FreeTaxUSA does have a CA adjustment that allows you to subtract any Paid Family Leave benefits that were reported to you in a W-2. Sometimes this information is reported on box 14 on the W-2. Please see this article from the CO Department of Revenue.

To report this specific benefit as a CA adjustment please navigate to your FreeTaxUSA CA return by following this menu path:

State > California > Adjustments.

Note this question "Did you have any Paid Family Leave income reported to you on Form W-2 or other wage reporting form?"

Answer Yes to this question and a box will appear for you to enter the amount of paid family leave wages from your CO W-2. The effect of this change will increase your CA refund as the Wage amount will decrease the CA state taxable income.

nb24 · Answer

I’ll take it one step further in complication

I was an employee in Colorado while my wife was pregnant, we temporarily moved to California at the end of 2024 and delivered. I applied and got paid out CO PFL through my companies insurance company who managed the claim for the first 3 months of 2024. I transitioned to a remote job and stayed in California so no income received or collected by Colorado, all income was due to California.

The insurance company sent me a W2 to report the PFL wages, not a 1099-G or 1099-Misc. FreeTaxUsa is not allowing me to enter the PFL wages in a way to deduct that from my taxable wages to California since CA does not tax PFL payments paid out by an employers insurance company.

When filling out the same info in our competitor software, the state refund goes up almost $900 in comparison. How can I do this?

Colorado_Resident · Answer

I have the exact some situation. In Colorado, FAMLI benefit paid by Colorado through a claims administrator. I paid for tax support from FreeTaxUSA and asked my support contact if he thought I incorrectly received a 1099-MISC instead of 1099-G and he did think that was the case based on information available on Colorado's FAMLI leave site, but didn't seem 100% sure.

Has anyone had success getting the claims administrator to issue a corrected 1099-G from a 1099-MISC? If so, what approach did you take?

Reading some articles online, it appears FAMLI paid benefit is taxed as benefit income, which only 50% of the income is taxable, so inputting it as benefit income vs Misc income can make a big difference on Federal taxes owed. So, very curious how others are handling this.