Third-Party Sick Pay is pay that an employee receives from a third party, other than their employer, for sick time (for example, disability insurance). This information must be forwarded to Assisted payroll service so that the employee's W-2 and other tax forms reflect the third-party payments.
This article explains how Assisted Payroll customers report third-party sick pay.
The Third-Party Sick Pay will be reported.
You subscribe to Assisted Payroll service and have received third-party sick pay information for an employee.
Assisted Payroll service cannot directly process the third-party sick pay (short term and long term disability) information through QuickBooks. To report third-party sick pay, verify the following information on the third-party report and fax it to 775.424.8972 or email it to RNAmendment_Team@intuit.com. The information will be reported via amended tax filings after the close of the applicable quarter.
Note: Using any other fax number will delay Intuit's response time.
- Employee's name
- Employee's Social Security Number
- Sick pay paid to the employee
- Federal income tax withheld
- Employee Social Security tax withheld
- Employee Medicare tax withheld
- State tax withheld
- Federal Employer Identification Number (EIN) number
This information is required by the IRS for reporting. If any of the information is missing from the third-party report, contact the third party to obtain it.
Once the information is received you will receive additional e-mail correspondence outlining next steps and expected actions which may include notification that your Assisted Payroll bank account will be debited for the company portions of taxes (Social Security and Medicare and any state taxes) if applicable. There is no charge for the amended tax forms or W-2c if applicable due to the real time reporting limitation within Assisted Payroll.
If an additional tax debit occurs, you may need to reconcile the bank account in QuickBooks Desktop. To do this, you must use the Write Check feature:
- Choose Banking > Write Checks.
- In the Pay to the Order line, select QuickBooks Payroll Service.
- The Date of the check should be the date the bank account was debited.
- On the Memo line, enter Third-Party Sick Pay for Period MM/DD/YYYY (as indicated in the cover letter in the Amendment paperwork you received).
- Click the Expense tab.
Depending on your payroll accounting setup:
- In the Account section, select Payroll Expense (or the appropriate expense account for the taxes being debited; this might be Payroll Expenses, Federal Tax Expenses, etc.)
- In the Amount section, enter the amount for taxes or total debit amount.
- In the Memo section, enter Third-Party Sick Pay.
- If you enter the amounts individually for Social Security Company, Medicare Company, Federal Unemployment Tax, State Unemployment Insurance, etc., you must repeat steps a, b and c for each item.
- Click Recalculate.
- Click Save and Close.
- Repeat above Steps 1 through 8 if more than one debit occurred. (Specifically, different debits for Federal or State taxes by QuickBooks Assisted Payroll service.)
How does Intuit process third party sick pay (disability) wages?
- Wages subject to federal withholding, social security, and Medicare are reported quarterly on amendments to the 941 filing. If necessary, W-2Cs will be prepared for your employees at the close of the year.
- Wages subject to federal unemployment are reported annually by amending the 940 filing.
- Wages subject to state unemployment are reported annually through amendments to the quarter 4 Unemployment filing.
- Wages subject to state withholding are reported annually through amendments to the quarter 4 and/or the annual state withholding filing.
Are there different types of third party sick pay wages?
Yes, there are different types of third party sick pay wages. They include:
- Short Term Disability is provided to employees during their first 6 months of disability. Short term disability is subject to federal withholding, social security, Medicare, and federal unemployment. State unemployment and state withholding taxability vary by state.
- Long Term Disability is provided to employees after 6 months of disability. Long term disability is subject to federal withholding. It is exempt from all other federal taxes including federal unemployment. State unemployment and state withholding taxability vary by state.
- Non-taxable Disability benefits are not subject to any federal or state taxes. Non-taxable Third Party Sick Pay wages can be paid during the first 6 months of disability, or after. Whether benefits are taxable or non-taxable is determined by the contract that you have with the insurance company.
- FUTA/SUTA only disability wages have already had the employee and employer portions of social security and Medicare matched by the insurance provider. The insurance provider will also prepare the W-2 for the employee. The FUTA and SUTA reporting becomes the responsibility of the employer and Intuit will report on your behalf.