Which one of the following regarding the State Disability Insurance (SDI) program is true?

A) The State Disability Insurance (SDI) program benefits received for a period of disability and benefits received for time off under the Paid Family Leave program are federally taxable as income.

B) The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income.

C) The State Disability Insurance (SDI) program benefits received for a period of disability and benefits received for time off under the Paid Family Leave program are not federally taxable as income.

D) The State Disability Insurance (SDI) program benefits received for a period of disability are taxable as income, but benefits received for time off under the Paid Family Leave program are not federally taxable as income.

B) The State Disability Insurance (SDI) program benefits received for a period of disability are not taxable as income, but benefits received for time off under the Paid Family Leave program are federally taxable as income.

Explanation:

Disability insurance benefits are not reported for tax purposes with one exception. If a person are receiving unemployment insurance benefits,

become unable to work due to a disability, and begin receiving disability insurance benefits, your disability insurance benefits are considered a substitution for your unemployment insurance benefits, and will then be reported for tax purposes.

If disability insurance benefits are reported, a notice will accompany the first benefit payment sent to you advising that the benefits are being reported to the Internal Revenue Service. The employment development department will provide you with a 1099G tax form in January showing the reported amounts paid and forward a copy to the Internal Revenue Service.

Paid family leave benefits are reported for federal purposes but not state tax purposes.

Paid family leave benefits are not taxable or reported to the California State Franchise Tax Board.