You can pay the IRS directly or withhold taxes from your payment. May I have my state taxes withheld?No, the Division of Retirement does not withhold any state taxes from any Florida Retirement System benefits. Florida State Disability Insurance (SDI) Rates. No, Florida does not mandate employers deduct state disability insurance (DSI) from employee wages. Are there local tax laws in Florida? Whether you need to withhold state disability taxes is also tied to the state where you're responsible for remitting unemployment taxes. Form RT-6NF allows you to report out-of-state wages paid to employees who worked in another state and are transferred to Florida. Reemployment Assistance benefits are taxable income. Wondering if taxes are taken out of short-term disability is a valid concern.