Under the Paid Family and Medical Leave (PFML) law, most Massachusetts employers are responsible for remitting family and medical leave contributions to the Department of Family and Medical Leave on behalf of their covered individuals. This can include W-2 employees and, in some cases, 1099-MISC contractors. These contributions may be covered by withholding from eligible wages. Generally, the PFML law follows the guidance of the Commonwealth's unemployment statute to determine wage eligibility as explained below.
Note: These withholdings should begin with the first payment made on or after Oct. 1, 2019. Therefore, the withholdings could be for services rendered in September but paid for in October.
Common examples of W-2 wages subject to PFML contributions
For the most part, the PFML law follows the unemployment statute (M.G.L. c. 151A) for determining what constitutes wages. This means that contributions should be based on the same wage base you report to the Department of Unemployment Assistance.
Generally, the following are considered wages:
- Salaries, hourly pay, non-cash tips, and stipends
- Commissions and bonuses
- Overtime, vacation, or sick pay
- 401K employer contributions
For a full definition of wages, please refer to section 1 of M.G.L. c. 151A.
Common examples of payments to 1099-MISC contractors subject to PFML contributions
Payments made to individuals or sole proprietorships are subject if you're required to issue an IRS form 1099-MISC and they qualify as covered individuals under the PFML law.
Generally, these payments include:
- Other income (Box 3): Depending on the nature of the payment, this category may be subject to contributions
- Fishing boat proceeds (Box 5)
- Medical and healthcare payments (Box 6)
- Nonemployee compensation (Box 7)
- Crop insurance proceeds (Box 10)
- Excess golden parachute payments (Box 13)
Note that only services provided that would otherwise require the issuance of a 1099-MISC are subject to contributions. For a full description of when a 1099-MISC is required, please refer to the IRS guidance on reporting payments to independent contractors.
1099-MISC worker reconciliation process for overpayment
For 1099-MISC workers who may have over-contributed to the paid family and medical leave (“PFML”) fund, the following guidance has been issued:
If you are self-employed and have opted into PFML, you should make contributions based on your net earnings.
If you're a 1099-MISC worker who is a covered individual, your employer may base contributions on your gross earnings instead. This may result in overpayment. If an adjustment needs to be made, you can do this on the Massachusetts personal income tax form. The instructions for the Massachusetts Form 1 and Form 1-NR/PY explain how to make this adjustment and recalculation for any overpayment.
PFML follows the same annual income limits as those set by the Social Security Administration for the Social Security Program. The 2019 income limit is set at $132,900. Social Security income limits typically reset annually and remain in effect for the calendar year.
The 2019 PFML income limit is calculated on wages or payments made to covered individuals from the start of contribution withholdings, Oct. 1, 2019. It's not calculated on year-to-date wages.
Tax treatment of PFML contributions
The tax treatment of PFML contributions for both state and federal purposes is governed by federal tax law. The Commonwealth has requested guidance from the Internal Revenue Service (IRS) on this question and others related to the tax implications of PFML contributions and benefits.
Until IRS guidance is issued, individuals and businesses are urged to consult with their own tax advisors on these questions.
Based on its own review of federal rules and following consultation with the Massachusetts Department of Revenue, the Department of Family and Medical Leave anticipates that the IRS will conclude that employee contributions should be withheld from after-tax wages.
A definitive rule for proper tax treatment of contributions will be available once IRS guidance is issued.
Reporting PFML contributions on W-2 and 1099-MISC tax forms
Employers reporting year-end PFML contributions on both the W-2 and 1099-MISC forms should report contributions on Box 14 for W-2s and Box 16 for 1099-MISC. In both cases, the boxes should read “MAPFML”
The amounts in Box 14 (on the W-2) and Box 16 (on the 1099-MISC) reflect the worker's year-end PFML contributions, not that of their employer. Contributions are calculated based on eligible wages earned by the employee up to the social security income limit. Therefore, if the worker's wages are considered wages under MGL c. 151A, the contribution must be made on those wages. Contributions are then remitted by the employer on behalf of the worker on a quarterly basis. Employers must issue either a 1099-MISC or W-2 that lists the total contributions (Box 16 or 14 respectively) withheld over the prior calendar year. The amounts provided in the Boxes should include both Family and Medical Leave combined.
|Last updated:||July 11, 2019|