In November, we notified you of the Internal Revenue Service’s anticipated January 1, 2026, start date for taxing FAMLI benefits. The Colorado Department of Labor's FAMLI Division has since announced that the Internal Revenue Service is delaying implementation of these withholding and reporting requirements by one year to 2027. The IRS decision is detailed in IRS Notice 2026-6.
According to the FAMLI Division, this means that:
For calendar year 2026, FAMLI will continue to operate under its existing federal tax treatment. No action is required at this time:
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FAMLI will not treat medical leave as “third-party sick pay,” and will continue to treat it like other benefits.
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There will be no new employer withholding or reporting requirements.
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There will be no changes to an employer's FICA tax responsibility.
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Employees may continue to elect federal income tax withholding, regardless of benefit type.
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FAMLI will continue to issue Form 1099-G directly to employees.
As before, all FAMLI benefits — including medical leave benefits — remain exempt from Colorado state income tax. The IRS guidance does not affect this exemption.
The FAMLI Division will engage in rulemaking and provide guidance before implementing any changes to federal withholding in 2027.
You may contact the FAMLI Division with questions by email at CDLE_FAMLI_info@state.co.us, or log in to your account at the MyFAMLI+Portal. Members may contact Employers Council at info@employerscouncil.org for additional resources.
Jacqueline Talbot, aPHR, is a Legal Assistant Paralegal with Employers Council.
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