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tmarie2
March 3, 2025
Question

Third-Party Sick Pay Employee Taxes

  • March 3, 2025
  • 1 reply
  • 0 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.

1 reply

J
Jeff_S
March 3, 2025

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:

 

  1. Go to Employees, then Payroll Taxes and Liabilities.
  2. Select Adjust Payroll Liabilities.
  3. Select Company Adjustment.
  4. 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.
  5. Select Accounts Affected.
  6. Select Affect liability and expense accounts.
  7. 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
March 6, 2025

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!

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