---
title: IRS Updates Guidance, Extends PFML Tax Transition Relief
description: The IRS has extended transition relief through the end of 2026, giving states and employers more time to meet tax and reporting requirements for state-paid PFML medical leave benefits funded by employer contributions
---

[Employee Benefit News for School, City and County Employers ](https://blog.nisbenefits.com)

# [IRS Updates Guidance, Extends PFML Tax Transition Relief](https://blog.nisbenefits.com/pfml-tax-transition-relief-extended)

 Written by [Erin Woulfe](https://blog.nisbenefits.com/author/erin-woulfe) | Jan 8, 2026 8:51:38 PM

The IRS has extended transition relief on certain paid family and medical leave (PFML) state and employer tax obligations under [Revenue Ruling 2025-4](https://www.irs.gov/pub/irs-drop/rr-25-04.pdf) through the end of 2026. This applies to the portion of state-paid medical leave benefits funded by employer contributions, as outlined in [IRS Notice 2026-6](https://www.irs.gov/pub/irs-drop/n-26-06.pdf) issued December 19, 2025.

 

## **Background: Revenue Ruling 2025-4**

Revenue Ruling 2025-4 clarifies that state-paid PFML medical leave benefits funded by employer contributions are: included in employees’ gross income under IRC §105; treated as wages for federal employment tax purposes under §§3121(a) and 3306(b); and considered third-party sick pay under §3402(o). States and employers must follow all related employment tax and reporting rules, with transition relief from enforcement provided for calendar year 2025.

 

## **Extension of Enforcement Relief**

States requested additional time to meet the tax and reporting requirements under Ruling 2025-4. In response, the IRS issued Notice 2026-6, extending enforcement relief for one year for third-party sick pay withholding and reporting, as well as employment tax and reporting on medical leave benefits funded by employer contributions under a state PFML program.

During this extension, states and employers will not face penalties for incorrect information returns or payee statements and are not required to withhold or pay related taxes on these benefits. However, the relief does not apply to “employer pickups” (the portion of an employee’s PFML contribution an employer voluntarily pays), which must still be treated as taxable wages and reported on the employee’s Form W-2.

 

## **Employer Takeaway**

Ruling Notice 2026-6 gives employers an extra year to meet certain tax and reporting obligations under Revenue Ruling 2025-4. Employers can use this time to update their processes and systems so that they are fully compliant by 2027. Download the [bulletin](https://blog.nisbenefits.com/hubfs/blog-supporting-docs/bulletin-pfml-transition-relief.pdf) for more details.

 

[View full post](https://blog.nisbenefits.com/pfml-tax-transition-relief-extended)

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