On December 19, 2025, the Internal Revenue Service (IRS) issued IRS Notice 2026-6, extending the federal transition period for state-paid family and medical leave (PFML) programs by an additional year. As a result of this new guidance, Massachusetts will delay the implementation of certain portions of the tax withholding and reporting requirements previously outlined in IRS Revenue Ruling 2025-4.

What This Means for Massachusetts Employers in 2026, according to the Department of Family Leave (DFML) website:

For calendar year 2026, employers can expect continuity in how PFML benefits are handled for tax purposes:

• The Department of Family and Medical Leave (DFML) will not treat medical leave benefit payments as third-party sick pay.
• There will be no new employer withholding or reporting requirements related to PFML benefits.
• Employer FICA and FUTA tax responsibilities for PFML benefits will remain unchanged.
• Employees may continue to elect federal and state income tax withholding on taxable PFML benefits.

Taxability of PFML Benefits

The tax treatment of PFML benefits in 2026 continues to depend on both employer size and the type of leave.

Medical Leave for employers with 25 or more employees:

• For employers with 25 or more employees, 60% of medical leave benefits are taxable for federal and state income tax purposes, based on employer contribution amounts.
• DFML will report on the taxable portion on Form 1099-G, issued directly to employees.

Medical Leave for employers with 25 or more employees:

• Medical leave benefits paid to employees of employers with fewer than 25 employees are not taxable.

Family Leave

• 100% of family leave benefits are taxable for federal and state income tax purposes.
• DFML will issue Form 1099-G directly to employees reporting the taxable amount.

What Should HR Do Now?

While the extension provides additional time before new requirements take effect, HR professionals should continue to:

• Educate employees on the taxability of PFML benefits
• Monitor IRS and DFML guidance
• Prepare for future changes once the federal transition period ends