FAMLI claimants are getting a new option when it comes to their federal tax withholding.
Starting in January, claimants will be able to decide whether they’d like the FAMLI Division to withhold federal income tax from their benefits. This will be a
simple opt-in or opt-out option, with the rate being set at a flat 10%.
Active claims won’t change, though those claimants will have the option to change their tax withholding preferences in their Payments Dashboards within My FAMLI+.
If you decide to have federal taxes withheld, the funds will automatically be withheld from future benefit payments, and FAMLI will remit the withheld amount on your behalf to the IRS.
Remember that Colorado doesn’t tax FAMLI benefits, but the IRS has not issued formal guidance on whether FAMLI benefits are subject to federal income tax. Current IRS guidance suggests that state programs like FAMLI are taxed similar to unemployment compensation, which is subject to federal income tax.
FAMLI will report to the IRS the amount of FAMLI benefits paid to each claimant during the year. We will issue IRS form 1099-G to claimants who received at least $10 in FAMLI benefit payments in a single tax year.
Learn more about your tax withholding options on famli.colorado.gov.