How to report Unemployment compensation paid to employer to buy back sick pay

[Davelias]

Taxpayer rec'd Paid Family leave and was required to pay it to his employer in order to buy back his sick time and vacation time from employer. Where does this get reported. The full amount was included in his W-2 from his employer.

[Skylane]

To clarify, the full amount or w2 reflected included sick and vacation leave paid in box 1? And the employee received a 1099g? 

was any of the income on w2 shown as sick pay?

[Davelias]

Yes on the 1099-G

Yes on the Box 1

No on showing as sick pay

Thanks

[Skylane]

PFL benefits are paid by the state so the 1099g is appropriate. (Assuming that benefit repayment to the employer is legal in that state) the employer should have reduced the employees earnings accordingly.

I think I would start by going to the employer, and explaining the double taxation …..best case would be as corrected w2… 

there used to be a worksheet and form for correct in W-2s in Pro Series, but I haven’t used it in years and have always been reticent to change the information reflected on the W-2 on the 1040. It will most likely result in a CP letter.

does the employer have an hr dept?   One can only hope

[Skylane]

I just noticed that we’re talking about repayment of unemployment benefits received. Not PFL benefits from the state… This is not passing the smell test.

[Davelias]

Taxpayer rec'd letter from his employer

RE: 7,830 paid to CVWD in Calendar Year 2022 under FMLA Leave

Letter states W-2 Form for 2022 reports full wages paid including time off related to Paid Family Leave. Employer suggests giving letter to his tax preparer to avoid over taxation. That implies he would be getting taxed on the money paid by the employer and on the money he gave over to the employer.  

[Skylane]

I’m not aware of any way to legitimately reduce the W2 income without setting off alarms on the IRS crossmatching. maybe someone else might have an idea. 

Is this a small employer? What state are you dealing with? 
still doesn’t smell good…. ER gets full payroll deduction and reimbursement of EEs benefit? Wonder how the employer recorded the reimbursement??? 

[Davelias]

California. 

This is a quasi-governmental agency (Water District).  Perhaps list as a negative adjustment on the other income worksheet?

[Skylane]

@Just-Lisa-Now-  are you familiar wit CA family leave act? Can employers do this or is the utility screwed up… or is CA?

quick google search says the program is Entirely EE funded…. https://smallbusinessmajority.org/resources/california-s-paid-family-leave-program

@Davelias another, i don’t think you can enter a negative number into other income

[Just-Lisa-Now-]

Sounds like the employer paid out PFL and the state paid the person for the same time period resulting in a payback of the employer funds.   

If it all happened in the same year, seems the W2 should have been adjusted.   If it was in 2 different years (paid in one year, paid back in the next) perhaps Claim of Right 1341 comes into play?  Pub 525, Page 37 has the details for his

[Skylane]

1341 sounds like a better solution than negative value in other income

https://www.investopedia.com/terms/t/taxcredit.asp