IR-2025-16: IRS issues guidance for the District of Columbia and States that have paid family and medical leave programs 

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Issue Number:    IR-2025-16

Inside This Issue


IRS issues guidance for the District of Columbia and States that have paid family and medical leave programs 

WASHINGTON — The Internal Revenue Service today issued guidance on the income and employment tax treatment of contributions and benefits paid in certain situations under a state paid family and medical leave program, as well as the related reporting requirements. Rev. Rul. 2025-4 provides guidance to the District of Columbia and states that have mandatory paid family and medical leave programs and for employees working in and employers operating in those states. Today’s guidance responds to requests to clarify the federal tax treatment of state paid leave programs that help pay employees who can’t work because of non-occupational injuries to themselves or family members, as well as sickness and disabilities. 

Multiple Scenarios  

The revenue ruling explains multiple tax treatment scenarios for contributions to and benefits paid in certain situations under these programs, and the related reporting requirements. 

For example, in general, employers can deduct the amount they contribute to mandatory paid family and medical leave programs as a payment of excise tax. Similarly, an employee may deduct the amount they contribute as a payment of income tax, if the employee itemizes deductions, to the extent that the employee’s deduction for state income taxes does not exceed the state income tax deduction limitation. 

An employee who receives state paid family leave payments must include those amounts in the employee’s gross income. An employee who receives state paid medical leave payments must include the amount attributable to the employer portion of contributions in the employee’s gross income. This latter amount also is subject both to the employer’s and employee’s shares of Social Security and Medicare taxes. The amount attributable to the employee’s portion of the contributions is excluded from the employee’s gross income, and this amount is not subject to Social Security or Medicare taxes. 

The revenue ruling provides additional guidance on other situations. 

Transition Relief  

In addition, the revenue ruling provides transition relief to the District of Columbia, states, and employers from certain withholding, payment, and information reporting requirements for State paid medical leave benefits paid made during calendar year 2025. 

This guidance will impact the District of Columbia and states administering paid family and medical leave programs, employers and workers contributing to such programs, and those who receive payments from these programs. 

The IRS is soliciting comments on additional situations and aspects of state paid family and medical leave programs that are not covered in this revenue ruling electronically via the Federal eRulemaking Portal at www.regulations.gov type IRS-2025-0012 in the search field on the www.regulations.gov homepage to find this revenue ruling and submit comments); or (b) By mail to: Internal Revenue Service, CC:PA:LPD:PR (Revenue Ruling 2025-4), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044. 

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IR-2025-15: IRS reminder: Wage statements and certain information returns due by Jan. 31 

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Issue Number:    IR-2025-15

Inside This Issue


IRS reminder: Wage statements and certain information returns due by Jan. 31 

WASHINGTON — As tax filing season nears, the Internal Revenue Service reminds businesses to submit wage statements and certain information returns to the federal government by Jan. 31. 

Filing the required forms by deadline and without errors not only helps payers and recipients avoid penalties, it also helps the IRS fight fraud by making it easier to verify income information. 

The Jan. 31 deadline applies to: 

Jan. 31 is also the deadline to:

  • Furnish copies of W-2, Form 1099-NEC and other information returns to the recipients. See each form’s filing instructions for the due dates to furnish copies to recipients.

E-filing 

Filing electronically is the fastest, most convenient way to accurately submit forms. 

As of last year, W-2s and certain other forms must be filed electronically if submitting 10 or more information returns during a calendar year. For more details, including a list of information returns subject to the new e-filing rules, see E-file information returns. 

The IRS also offers free e-filing for the 1099 series using the Information Returns Intake System (IRIS), an online portal where users can prepare copies of forms to furnish, file correction and request automatic extensions. 

Requesting extensions 

While employers and payers may request a 30-day extension to file W-2s or certain information returns, approvals of extensions are not automatic. To request extra filing time, submit Form 8809, Application for Extension of Time to File Information Returns, by Jan. 31 or by the due date of the returns being requested. 

Please note that filing a Form 8809 does not extend the deadline for furnishing wage statements to employees or information returns to the payees. Those requests must be faxed to IRS in letter form by Jan. 31. Please see About Form 8809, Application for Extension of Time to File Information Returns, for more information. 

Potential penalties 

If employers and payers haven’t already, start preparing filings now so there is time to double check the accuracy of the forms and file and furnish them by Jan. 31. 

Penalties may apply filings are untimely, inaccurate and/or improperly submitted to the federal government on paper. For more information, including a breakdown of potential penalties and interest, visit the Information Return Penalties page at IRS.gov. 

Additional resources 

Use the IRS’s Forms, Instructions and Publications Search Tool to look up more information about or instructions for all current IRS forms, including those listed above, or visit the Forms, Instruction and Publications page on IRS.gov.

 

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IR-2025-14: IRS initiates Fast Track Settlement pilot programs in effort to make Alternative Dispute Resolution faster and easier

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Issue Number:    IR-2025-14

Inside This Issue


IRS initiates Fast Track Settlement pilot programs in effort to make Alternative Dispute Resolution faster and easier 

WASHINGTONThe Internal Revenue Service today announced three pilot programs that will test changes to existing Alternative Dispute Resolution (ADR) programs. 

IRS ADR programs are designed to help taxpayers resolve tax disputes earlier and more efficiently. 

“The IRS has been revitalizing existing ADR programs as part of IRS transformation efforts in alignment with the IRS Strategic Operating Plan,” said Elizabeth Askey, Chief of the IRS Independent Office of Appeals (Appeals). “We’re committed to providing taxpayers who wish to resolve their issues without litigation a choice of effective and efficient ADR options as early as possible.” 

“The IRS has historically made ADR available at various stages of the administrative process. Because ADR can be a quicker, more collaborative and cost-effective approach to case resolution, we have been working to improve ADR functionality and emphasizing its benefits,” said Michael Baillif, Director of Appeals’ ADR Program Management Office. “By increasing awareness, changing and revitalizing existing programs and piloting new approaches, we hope to make our ADR programs, such as Fast Track Settlement and Post-Appeals Mediation, more attractive and accessible for all eligible parties.” 

The pilots announced by the IRS today focus on Fast Track Settlement (FTS)—a program that allows Appeals to mediate disputes between a taxpayer and the IRS while the case is still within the jurisdiction of the examination function, and Post-Appeals Mediation (PAM), a program in which a mediator is introduced to help foster a settlement between Appeals and the taxpayer. Among other things, the pilots: 

  • Align the Large Business and International (LB&I), Small Business and Self-Employed (SB/SE) and Tax Exempt and Government Entities (TE/GE) divisions in offering FTS on an issue-by-issue basis. Previously, if a taxpayer had one issue that was ineligible for FTS, the entire case was ineligible. This Announcement increases ADR availability and flexibility by allowing FTS for single issues.
  • Provide that requests to participate in FTS and PAM will not be denied without the approval of a first-line executive. This helps ensure a more consistent and deliberate consideration of FTS and PAM requests.
  • Clarify that when requests for FTS or PAM are formally denied, taxpayers will receive an explanation for the denial. This facilitates transparency in the ADR process, even when acceptance of a request is not feasible. 

Another pilot, Last Chance FTS, is a limited scope SB/SE pilot in which Appeals will call taxpayers or their representatives after a protest is filed in response to a 30-day or equivalent letter to inform taxpayers about the potential application of FTS to their case. This pilot will not impact eligibility for FTS but will simply test the awareness of taxpayers in the pilot group regarding the availability of FTS and measure the extent of participation when taxpayers are reminded of their FTS options immediately prior to the case entering Appeals’ jurisdiction. 

A final pilot removes the limitation that participation in FTS would preclude eligibility for PAM. Eliminating this restriction on PAM eligibility encourages the use of ADR options. 

These proposed ADR enhancements take into account recommendations from the Government Accountability Office and the Taxpayer Advocate Service, as well as input from both internal and external stakeholders who provided suggestions in response to the IRS’s July 27, 2023, request for comment. The traditional appeals process remains available for all taxpayers. 

Additional improvements in various ADR programs are under development and will be rolled out as they are finalized. The IRS remains committed to creating and maintaining a robust set of ADR offerings that allow taxpayers multiple options for successfully resolving their cases. 

General inquiries regarding ADR can be addressed to the ADR Program Management Office at ap.adr.programs@irs.gov.  Questions or comments regarding the changes being piloted, including suggested improvements to make FTS and PAM more useful and effective, can be submitted as set forth in the Announcement 2025-06

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