Employer's Third Party Sick Pay Agreements Chart

The Employer's Third Party Sick Pay Agreements Chart is a quick reference tool to assist you in determining where and how you must handle Third Party Sick Pay according to the contract that exists between the customer and their insurance company. This chart defines, in accordance with information published by the IRS, the areas of responsibilities between an employer and an insurance company for the withholding of taxes, reporting of wages, and issuance of W-2
forms for Third Party Sick Pay.

Employer Third Party Sick Pay Agreements

Payments by a Self-Insured Employer:

Taxable for:

Depositing:

Reporting:

W-2 Filing:

  • FICA: up to mandatory limits (for 1st six months only)

  • FIT: optional (by employee request)

  • SIT: optional (by employee request)

  • FUTA

  • SUI(in some states)

Employer: withholds anddeposits any FICA (both employee and employer), FIT, and/or SIT taxes per agency requirements with employer federal or state EIN. Also deposits any FUTA and/or SUI.

Employer: reports all sick pay payments and taxes with all regular wage payments on all applicable tax returns

Employer: includes sick pay payments on employee W-2 as income for FICA, FIT, and/or SIT, as applicable, and any FICA, FIT and/or SIT taxes, as applicable

 

Payments by an Agent (as contracted by employer for paperwork only, reimbursed for payments)

If Employer retains responsibility:

Taxable for:

Depositing:

Reporting:

W-2 Filing:

  • FICA: up to mandatory limits (for 1st six months only)

  • FIT: optional (per employee request)

  • SIT: optional (per employee request)

  • FUTA

  • SUI (in some states)

Employer: deposits any withheld FICA (both employee and employer), FIT, and/or SIT taxes per agency requirements with employer federal or state EIN. Also deposits any FUTA and/or SUI.

Employer: reports all sick pay payments and taxes with all regular wage payments on all applicable tax returns

Employer: includes sick pay payments on employee W-2 as income for FICA, FIT, and/or SIT, as applicable, and any FICA, FIT and/or SIT taxes, as applicable

 

If Agent is contracted to assume responsibility for employment taxes:

Taxable for:

Depositing:

Reporting:

W-2 Filing:

  • Same as above

Agent: withholds anddeposits any FICA (both employee and employer), FIT, and/or SIT taxes per agency requirements with agent federal or state EIN. Also deposits ant FUTA and/or SUI.

Agent: reports all sick pay payments and taxes with other wage payments on all agent tax returns

Agent: gives each employee to whom it paid sick pay a W-2 using agent federal EIN