COLORADO – CHANGES TO FAMLI BENEFIT TAXES

Starting in 2026, a portion of medical leave benefits provided by the FAMLI program will be treated as “third-party sick pay” taxable wages. These changes are only applicable to employers with 10 or more employees. Beginning January 1, 2026, employers will be responsible for paying their share of FICA and FUTA taxes on benefits paid to employees for FAMLI medical leave.

Small employers and self-employed individuals will not see this change and will therefore not have medical benefits treated as taxable wages.

There is no action necessary at this time. The IRS has a built in grace period through December 31, 2025 and there will be no new reporting requirements, withholdings, or forms until January 1, 2026. The Colorado Department of Labor and Employment Family & Medical Leave Insurance Division will continue to share updates to ensure all employers are prepared for the upcoming changes.

IOWA – NEW FRAUD SCHEME! DEMANDING PAYMENT ON LIEN/DEBT

The Iowa Workforce Development (IWD) recently issued a warning to claimants about the newest scheme targeting individuals who have filed/received unemployment benefits.

Claimants are being targeted with fake letters demanding payment on a lien or debt owed. While the letters may appear legitimate, the phone number(s) listed on the letter are routed to the bad actors and will not direct individuals to the IWD.

When in doubt, claimants and employers should be cautious, using only known contact information directly from the IWD. They have provided the following phone numbers:

• For Claimant Overpayments: 1-800-914-6808

• For Employer Collections: 888-848-7442 option 3

It is always helpful to remain vigilant and aware when receiving unsolicited and/or questionable notices.

IRS – FEDERAL SHUTDOWN MAY RESULT IN LONGER PROCESSING TIMES

While the IRS continues to operate during the government shutdown, it is in limited capacity which will likely result in increased processing times. This may impact any forms, processing, and/or communication through which Thomas & Company is working as a third-party on your behalf with the IRS on tax matters.

As a reminder, from an unemployment perspective, state agencies are responsible for processing UC applications & paying benefits & will continue doing so for existing & new claimants as long as allocated administrative funds remain available. Funding for the unemployment program is through a federal grant. Benefits will continue to be paid as long as administrative funds remain available.

VERMONT – TAXABLE WAGE BASE INCREASE FOR CALENDAR YEAR 2026

The taxable wage base for 2026 will increase to $15,400, up 4.1% from the current level of $14,800.