Payroll > Payroll Year End > Third Party Sick Leave

If the insurance company states that you have to report the sick leave payments as earnings, and report on the W-2 and 941, then you will need to do the following:

1.Set up a deduction for the Third Part Sick Leave

2.Run a Payroll Cycle putting in the amount of the wages in the normal earning detail (or setup a new one for Third Party if desired) and the net amount of the check is put in the deduction since this is a zero check. You can make the EFTPS (941) tax deposit for the total taxes owed, or you can reduce it by the amount the insurance company paid.

a.The 941 menu has a “Line 7. Letter” field. Choose the “B – Current quarter’s sick pay” option.

b.Then the “Adjustment” amount is where you would enter in the amount of taxes that the insurance company paid for the employee’s taxes. That normally is a negative amount. This means the 941 will show the total amount of taxes owed, reduced by this amount that the insurance company paid for the employee.

i.If you paid the full amount of taxes on the Third Party cycle you ran above, then this method will show you have a refund coming, because you paid the full amount even though the insurance company paid the employee portion.

ii.If you reduced your amount of taxes for the cycle by the employee portion (because the insurance company paid that already,) your 941 should show a zero balance due.

3.On the W-2 the amount of the Third Party can be in the regular wage categories (Fed W/H Wage, SS Wage, Medicare Wage) and manually mark the employee payee record as Third Party Sick. (In the Employee Master, on the “Other” tab, there is a field in the “W-2 Boxes” area you can check called “Third-party sick pay”. Checking that field will check that box on the W-2 for you.

Notes:

•The deduction GL Liability Account could be posted to the wages expense account, because they did not actually pay out the wages; however if they are trying to match the W-2s back to the GL it will not tie in.

•Also if an employee is paid Third party sick leave each pay period it should be handled accordingly in the actual quarter.

Be careful: There is an option that employers can take to let the insurance company send out the W-2.

•in one case the insurance company will pay the employer’s part of the social security/medicare, in this case there is nothing done on the employer’s side

•in another case the insurance company will not pay the employer’s part of the security/medicare , in this case you will not put anything into Pak Accounting but you will have to add the amount of the employer’s security/medicare to the 941.