In Notice 2026-06, the IRS and Treasury extended for one year the transition relief for employers now obligated to comply with employment tax and reporting obligations related to federal and state paid family and medical leave programs. This means the IRS will treat 2026 as a continued transition period with respect to medical leave benefits paid by a state that are attributable to employer contributions.
According to the Notice, during 2026 states and participating employers will not be required to comply with federal income tax withholding, employment tax, or related information reporting requirements applicable to third-party sick pay for that portion of paid family and medical leave benefits. Similarly, they will not be subject to associated penalties for noncompliance.
Prospects: Notice 2026-06 clarifies the earlier-issued Revenue Ruling 2025-4 That Notice made clear that this transition relief is limited to state paid leave plans in which employers are participating. IRS said the transition relief is a result of requests from states administering paid leave programs. The states told the IRS that they need additional time to update systems, budgets, and reporting processes to align with the federal tax rules outlined in Revenue Ruling 2025-4.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.