Employer paid Family leave taxable in CA?

[user17521061672]

I took family leave in 2021 and received a W2 from Hartford stating "Third party sick pay" in Box 13. Federal tax was withheld. 

I filed using turbo tax and it seems like TT has marked that as a deduction in Schedule CA 540. 

Fast forward now 3 years later, I receive a letter from the IRS saying that that 3rd party sick pay that was marked as a subtraction for CA was actually taxable and wants me to pay tax now. 

I checked my other returns for the other kids and all of them have it as a subtraction, so I am not sure why they are complaining only about this one.

Questions:

1. Is it accurate that paid family leave is taxable for CA ?

2. Also did I make a mistake in TT while filing state taxes so it did this incorrectly? Generally i get asked no questions for state other than state credit. So i am wondering what i missed.

Thanks. 

[JotikaT2]

It depends.

If the paid family leave was paid by your employer on your W-2, then it would be taxable on both your federal and state return.  If it was paid by the EDD and reported on Form 1099-G or paid by VPDI, then it would not be taxable on your state return.  See this link for more details.  

If you determine your return is in error and you need to amend your returns, please see this link for more guidance.