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North America
The IRS has issued Rev. Rul. 2025-4, providing essential guidance on the tax treatment of contributions and benefits from state paid family and medical leave programs. This ruling addresses the tax implications for employees and employers in states with mandatory paid leave, clarifying that employees must include state paid family leave payments in their gross income. The IRS says: "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." The guidance also outlines various tax treatment scenarios and offers transition relief for 2025. The IRS is inviting comments on additional aspects of these programs through the Federal eRulemaking Portal.
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