What changed on December 19, 2025
The IRS has extended transition relief for state paid family and medical leave (PFML) programs into tax year 2026. Under Notice 2026-6, the agency delayed treating 2026 paid medical leave benefits as “third‑party sick pay,” pushing related federal withholding and W‑2 reporting to 2027. The relief builds on Revenue Ruling 2025‑4, which set baseline federal income and employment tax treatment for state PFML programs. For Minnesota employers gearing up for Paid Leave’s January 1, 2026 launch, this removes a big payroll headache in the first year.
What’s taxable in 2026
- Family leave benefits: Taxable to the employee as income, but not “wages” for employment tax purposes. They are not reported on a W‑2 for 2026; the state will issue an information return to the claimant.
- Medical leave benefits: For 2026 only, the portion attributable to the employer’s required premium share is taxable income to the employee, but not treated as wages or third‑party sick pay; Minnesota will issue a year‑end information return. The employee‑funded portion is excluded from federal gross income.
Beginning in 2027, the employer‑attributable portion of medical leave benefits will be treated as wages under the third‑party sick pay rules, subject to federal income tax withholding, Social Security, Medicare and FUTA.
Minnesota payroll steps for fleets and owner‑ops with employees
- Set your premium rate assumptions: The 2026 PFML premium is 0.88% of taxable wages, typically split 50/50 between employer and employee (0.44% each). Qualifying small employers receive a reduced employer rate.
- Know your first due date: Premiums are due quarterly through the state’s UI system; first payments are due April 30, 2026 on wages paid January 1–March 31, 2026.
- W‑2 coding for 2026: Report the employee’s PFML premium deduction and any employer “pickup” beyond the required share in Box 14 using “MNPFML” (you may split medical and family as “MNPML” and “MNPFL”). These amounts do not change Boxes 1/3/5 unless you pick up more than the minimum.
- Communicate withholding choices: When applying for benefits, employees can elect optional 10% federal and 5% Minnesota withholding from weekly PFML payments—set by state statute, not the IRS.
- No W‑2 reporting of PFML benefits in 2026: Because medical benefits aren’t treated as third‑party sick pay until 2027, employers have no 2026 W‑2 wage reporting or payroll tax liability tied to PFML benefits. Keep an eye on 2027 process changes.
Implications for multi‑state trucking operations
Revenue Ruling 2025‑4 addresses federal tax treatment across all state PFML programs, but implementation details still vary by state agency. Fleets paying drivers who live or work in multiple states should align payroll codes, wage caps and premium splits state by state, and apply the federal relief consistently for 2026. Build 2027 workflows now for third‑party sick pay (Form 8922 coordination, FICA/FUTA allocation, and employer/agency data exchange).
Action checklist before January payrolls run
- Update payroll systems with Minnesota PFML earnings caps, 0.88% rate, and Box 14 codes.
- Configure deductions as post‑tax for employees and map any employer “pickup” beyond the 50% minimum to taxable wages.
- Register your Paid Leave administrator in the Minnesota employer portal and confirm your quarterly remittance path via the UI system.
- Draft driver communications covering benefit taxability, optional benefit withholding, and first‑quarter premium timing.
The bottom line
For 2026, the IRS has given fleets breathing room: PFML medical benefits paid by Minnesota won’t hit your W‑2s or payroll tax deposits until 2027. Focus on getting premiums and Box 14 reporting right in 2026, then prepare for third‑party sick pay treatment next year. That planning now will spare you rework when the rules tighten on January 1, 2027.
Sources Consulted: Conway, Deuth & Schmiesing (CDS) News & Insights; IRS Internal Revenue Bulletin (Rev. Rul. 2025‑4) and Notice 2015‑6; EY Tax News; Minnesota Unemployment Insurance/Paid Leave; League of Minnesota Cities; Minnesota Chamber of Commerce; NFIB.
Need to file your Form 2290?
Join thousands of owner-operators and carriers who trust HeavyTax.com for fast and easy HVUT e-filing.
This article was prepared exclusively for truckstopinsider.com. For professional tax advice, consult a qualified professional.
