Third-Party Sick Pay
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      Reporting Requirements for Third-Party Sick Pay

      What are the reporting requirements for third-party sick pay wages and taxes, and who is responsible?

      What are the reporting requirements related to third-party sick pay?

      • Form(s) W-2, Wage and Tax Statement: provided to the employee(s) and submitted to the SSA, annually
      • Form(s) 941, Employer's Federal Tax Return: submitted to the IRS, quarterly
      • Form 940, Employer's Federal Unemployment Tax Return: submitted to the IRS, annually
      • Form 8922, Third-Party Sick Pay Recap: submitted to the IRS, annually

      Who is responsible for filing each of these forms?

      Reporting third-party sick pay can get tricky as it depends significantly on the specific arrangement your company has with the third party.  It is important to note that sick pay must be reported on Form W-2 regardless of how the payments were taxed.  Both taxable and non-taxable portions of the third-party sick pay payments are reported.  Below are the two most common examples of these arrangements.

      • Reporting arrangement 1, with W-2s produced and filed by the third party.
        • Form(s) W-2: The third-party payer is responsible for third-party sick pay W-2 reporting by providing a W-2 to the employee(s) and filing them to the SSA under the name and EIN of the third party.
        • Form 941: Both the employer and the third party will file Form 941
        • Form 940: The employer will prepare and file Form 940
        • Form 8922: The employer must file Form 8922 under this arrangement
      • Reporting arrangement 2, with W-2s produced and filed by the employer.
        • Form(s) W-2: The employer is responsible for third-party sick pay W-2 reporting by providing a W-2 to the employee(s) and filing them to the SSA under your company name and EIN. 
        • Form 941: Both the employer and the third party will file Form 941
        • Form 940: The employer will prepare and file Form 940
        • Form 8922: The third party must file Form 8922 under this arrangement

      When determining which arrangement will work best for your company, it is important to consider the year-end processing timelines and cutoffs. 

      • If the third party is able to provide detailed reporting of the payments made to employees prior to the end of the year, you will avoid additional fees from Fuse for possibly having to redo the original W-2s for your company or having to do amendments.
      • If the third party is NOT able to provide detailed reporting of the payments made to employees until after the end of the year, it is best to make arrangements for the third party to produce and file the third party sick pay W-2s.

      How are the employer tax payments handled?

      When the third party issues third-party sick pay payments to your employees, they withhold and deposit the employee portion of taxes.  By entering the third-party sick pay payments as adjustments in your payroll, Fuse will handle the payment and reporting of the employer taxes you are responsible for, including the following:

      • The employer matching Social Security and Medicare taxes
      • The employer Federal Unemployment Tax (FUTA), if the employee is below the taxable wage base for the year
      • The employer State Unemployment Tax (SUTA), if the employee is below the taxable wages base for the year
      In some scenarios, the third party will offer to deposit and report your employer taxes as well, so please ensure you understand that arrangement so as not to inadvertently double-report or pay your taxes.

       

      For more information on how to enter payroll adjustments for the third-party sick pay payments reported to your company by the third party, please review the following article: Payroll Adjustments for Third-Party Sick Pay Amounts