Third-Party Sick Pay

• Overview
• Credits

Find out how to provide sick pay through a third party and learn the proper tax reporting obligations.This topic will examine third-party sick pay. Most employers provide some degree of wage protection for employees who miss work as a result of personal illness or injury. Sick pay paid directly by an employer generally is treated as ordinary wages, subject to withholding for federal employment taxes. FICA taxes, however, apply to such payments only for the first six months. This topic will discuss the details of providing sick pay through a third party, such as an insurance company, and its tax withholding ramifications. This topic will examine which portions of the sick pay are subject to tax withholding and which are not. Also, we will look at which forms to complete when reporting this to the federal government.

Authors

Agenda

Federal Employment Tax Rules

• Relevant Definitions

• Splitting Employment Tax Responsibilities

Determining Payment to IRS

• Social Security Tax

• Medicare Tax

• FUTA

• Federal Income Tax

Liability

• Employer

• Third-Party Payer

Reporting Sick Pay

• Deposits

• Examples

- Form W-2

- Form W-3

- Form 940

- Form 941

Other Relevant Sick Pay Issues