Question

Third-Party Sick Pay Employee Taxes

Forum|Forum|1 year ago
March 3, 2025
11 replies
72 views

If an employer is supposed to report SS & Medicare Taxes that were withheld from an employee by a Third-Party for short-term disability sick pay, but aren't actually supposed to withhold those taxes because the Third-Party withheld them, how is that addressed on an employee's paycheck? QB will not allow to withhold only the Employer portion of SS & Medicare taxes without withholding the Employee portion as well when posting the Third-Party Sick Pay to an employee's record. How am I supposed to ensure an Employee's W-2 is correct if I'm not supposed to deduct Employee SS & Medicare taxes from Sick Pay but it's supposed to reflect on their W-2?

Can this be addressed through a liability adjustment versus a payroll item or does Third-Party Sick Pay have to be posted within an Employee's "Paycheck"?

I hope I'm making sense.

QuickBooks Desktop Payroll

J

Jeff_S

QuickBooks Team

Hello, there. tmarie2. Can you please share what payroll subscription you are using. Doing so will allow us to provide you with a more targeted response. Let me assist you in accurately recording your employee's third-party sick pay in QuickBooks Desktop.

If you are using QuickBooks Desktop Payroll Enhanced you need to report taxable third-party sick pay on your employee W-2, 941, and 940 that was withheld by the third party. Here's how:

Go to Employees, then Payroll Taxes and Liabilities.
Select Adjust Payroll Liabilities.
Select Company Adjustment.
Under the Item Name column, select Social Security Employee and Medicare Employee and enter a negative amount of the tax withheld by the third party.
Select Accounts Affected.
Select Affect liability and expense accounts.
Then, hit OK.

Then, override line 8 with a negative amount for Social Security Employee and Medicare Employee withheld on the sick pay by the third party. See Section 6 of Publication 15A for details on tax adjustments on third-party sick pay.

But if you are using QuickBooks Desktop Payroll Assisted, then you need to verify the following info on the third-party report:

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

Then, email the third-party report to Intuit at RNAmendment_Team@intuit.com.

If any of the info is missing from the third-party report or Explanation of Benefits (EOB), contact the third party to obtain it.

Moreover, you can check if the liabilities are updated by running these reports:

By carefully following these steps, you can accurately correct your payroll tax liabilities and ensure compliance. If you have questions or need more assistance, feel free to reply. I am dedicated to helping you efficiently and accurately navigate this process.

T

tmarie2Author

Thank you! Yes, I am using QuickBooks Desktop Payroll Enhanced.

So I just select "Company Adjustment"? So, does this process keep the Employee portion of SS & Medicare from coming out of the Third-Party Sick Pay Wages payroll item when posting? Should the SS & Medicare taxes that were deducted from the employee's claim check (issued by the third-party) reflect on the employee's W-2? I know the sick pay wages do per the payroll item set up, but wondering about the employee taxes.

Thank You!

C

csc21

Did this get resolved? How are you able to have the employee portion of FICA paid by a third party for sick pay not deducted from the paycheck but included in their W-2?

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