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District of Columbia to Collect New Tax from Private Sector Employers to Support Paid Family Leave Benefit

Starting on April 1, 2019, private sector employers in the District of Columbia must begin tracking wages for its employees for purposes of paying a new tax to fund the District’s Paid Family Leave (PFL) benefit. The first quarterly payment to the District of Columbia (beginning on July 1) will be determined from a calculation based on employee wages for the previous three months. The first payment, for example, will be determined based on wages paid to employees during April, May and June 2019.

The tax is the sole responsibility of each employer and cannot be deducted from employees’ wages.

The PFL benefit is managed by the Office of Paid Family Leave in the District of Columbia and is intended to provide up to eight weeks of benefits for parents who take time off from work to care for newborn children, six weeks to care for an ill family member (with a significant health condition) and two weeks of self-care for a significant illness.

Benefits will go into effect on July 1, 2020, a year after tax collections begin.

Councilor, Buchanan & Mitchell (CBM) has compiled the following details, which may be helpful for private-sector employers in the District of Columbia to know:

• The payroll tax for each employer is set at .62% of the gross wages paid to employees for the previous quarter
• Employers must submit quarterly wage reports and tax payments through an online portal (which will be made available before the start of tax collections)
• Employers affected by this tax must post a notice about Paid Family Leave to educate employees, and must remind employees of this benefit on an annual basis
• Employers must collect and track wages and any documentation relevant to PFL tax payments beginning on April 1, 2019

More information can also be found on the website of the DC Office of Paid Family Leave.

CBM will continue to monitor developments regarding the new PFL tax and share it with clients and others throughout the District of Columbia. Should you have any questions about the new tax in the meantime, please contact Tax Services Director Richard Morris at CBM at 301.986.0600.

Councilor, Buchanan & Mitchell (CBM) is a professional services firm delivering tax, accounting and business advisory expertise throughout the Mid-Atlantic region from offices in Bethesda, MD and Washington, DC.   

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Contact Richard E. Morris, CPA, MSTView Profile

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