[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-1-en-105":3,"doc-seo-303123-105":53,"doc-detail-303123-en":127},{"code":4,"msg":5,"data":6},0,"success",[7,14,19,24,29,34,39,44,49],{"id":8,"doc_module":9,"doc_module_name":10,"category_name":11,"show_sort_weight":12,"slug":13},11,1,"Template","Presentations",90,"presentations",{"id":15,"doc_module":9,"doc_module_name":10,"category_name":16,"show_sort_weight":17,"slug":18},12,"Resumes",80,"resumes",{"id":20,"doc_module":9,"doc_module_name":10,"category_name":21,"show_sort_weight":22,"slug":23},14,"Invoices",70,"invoices",{"id":25,"doc_module":9,"doc_module_name":10,"category_name":26,"show_sort_weight":27,"slug":28},15,"Posters",60,"posters",{"id":30,"doc_module":9,"doc_module_name":10,"category_name":31,"show_sort_weight":32,"slug":33},16,"Social Media",50,"social-media",{"id":35,"doc_module":9,"doc_module_name":10,"category_name":36,"show_sort_weight":37,"slug":38},17,"Forms",40,"forms",{"id":40,"doc_module":9,"doc_module_name":10,"category_name":41,"show_sort_weight":42,"slug":43},18,"Letters",30,"letters",{"id":45,"doc_module":9,"doc_module_name":10,"category_name":46,"show_sort_weight":47,"slug":48},21,"Paper Templates",5,"papers-templates",{"id":50,"doc_module":9,"doc_module_name":10,"category_name":51,"show_sort_weight":4,"slug":52},158,"General","general-158",{"code":4,"msg":54,"data":55},"ok",{"site_id":56,"language":57,"slug":58,"title":59,"keywords":60,"description":61,"schema_data":62,"social_meta":120,"head_meta":122,"extra_data":124,"updated_unix":126},105,"en","third-party-sick-pay-the-10-most-frequently-asked-questions","Third-Party Sick Pay - The 10 Most Frequently Asked Questions","","Third-party sick pay explains how wage continuation benefits paid to employees during qualifying non-work-related disability leave are treated when insurers or state disability funds administer the plan. It addresses how tax and reporting responsibilities are shared by employers and third-party payers, which often causes confusion and reporting errors. The guide provides answers to ten frequently asked questions covering federal taxable wages, FIT and withholding, FICA and FUTA timing, W-2 filing, and coverage-period concepts under relevant IRS rules.",{"@graph":63,"@context":119},[64,80,102],{"@type":65,"itemListElement":66},"BreadcrumbList",[67,71,74,77],{"item":68,"name":69,"@type":70,"position":9},"https://docshare.wps.com","Home","ListItem",{"item":72,"name":10,"@type":70,"position":73},"https://docshare.wps.com/template/",2,{"item":75,"name":41,"@type":70,"position":76},"https://docshare.wps.com/template/letters/",3,{"item":78,"name":59,"@type":70,"position":79},"https://docshare.wps.com/template/third-party-sick-pay-the-10-most-frequently-asked-questions/303123/",4,{"url":78,"name":59,"@type":81,"image":82,"author":87,"headline":59,"publisher":90,"fileFormat":93,"inLanguage":57,"description":61,"dateModified":94,"datePublished":95,"encodingFormat":93,"isAccessibleForFree":96,"interactionStatistic":97},"DigitalDocument",{"url":83,"@type":84,"width":85,"height":86},"https://docshare.wps.com/thumbnails/third-party-sick-pay-the-10-most-frequently-asked-questions/303123.png","ImageObject",442,249,{"name":88,"@type":89},"River Wang","Person",{"url":68,"name":91,"@type":92},"DocShare","Organization","application/pdf","2026-10-06","2026-09-19",true,{"@type":98,"interactionType":99,"userInteractionCount":101},"InteractionCounter",{"@type":100},"ViewAction",7,{"@type":103,"mainEntity":104},"FAQPage",[105,111,115],{"name":106,"@type":107,"acceptedAnswer":108},"When are employer-paid disability insurance premiums included in federal taxable wages?","Question",{"text":109,"@type":110},"Employer-paid disability insurance premiums are excluded from wages subject to federal income tax, federal income tax withholding, Social Security/Medicare (FICA), and federal unemployment insurance (FUTA), under IRC §106(a).","Answer",{"name":112,"@type":107,"acceptedAnswer":113},"When are disability leave benefits included in wages subject to federal income tax (FIT)?",{"text":114,"@type":110},"Generally, disability pay is included in FIT taxable wages to the extent the employer pays for the insurance cost; amounts funded by employee contributions are exempt from FIT. Taxable disability benefits are included in FIT wages for the duration paid (unlike FICA and FUTA, which apply only during the six-month coverage period).",{"name":116,"@type":107,"acceptedAnswer":117},"How is federal income tax withholding (FITW) computed on taxable benefits?",{"text":118,"@type":110},"FITW depends on who bears the insurance risk. If the employer bears the risk, withholding is computed using the employee’s Form W-4 and regular wage withholding rules (or a 25% supplemental withholding rate may apply when an agent makes the payments). If a third party bears the risk, FIT is withheld only if the employee submits Form W-4S to that third party.","https://schema.org",{"og:url":78,"og:type":121,"og:title":59,"og:site_name":91,"og:description":61},"article",{"robots":123,"canonical":78},"index,follow",{"doc_id":125,"site_id":56},303123,1790010647,{"code":4,"msg":5,"data":128},{"doc_id":125,"user_id":129,"nickname":88,"user_avatar":130,"doc_module":9,"category_id":40,"category_name":41,"doc_title":59,"doc_description":61,"doc_content":131,"file_id":132,"file_url":133,"file_type":134,"file_size":135,"view_count":101,"is_deleted":4,"is_public":9,"is_downloadable":9,"audit_status":9,"page_count":15,"language":136,"language_code":57,"site_id":56,"html_lang":57,"table_of_contents":137,"faqs":138,"seo_title":139,"seo_description":61,"update_tm":140,"read_time":79},1099514067438,"https://ap-avatar.wpscdn.com/avatar/100002539ee87300030?x-image-process=image/resize,m_fixed,w_180,h_180&k=1780474512215547542","Third-party sick pay  \nWhat employers should know  \nThird-party sick pay:  \nthe 10 most frequently asked questions  \nBy Debera J. Salam, CPP, Ernst & Young LLP  \nThird-party sick pay describes payments received by employees through private insurers or state disability insurance funds for wage continuation during a qualified non-work-related disability-related leave. Some businesses fund their own disability leave benefits and may outsource administration of the plan to a third party. Regardless of who bears the insurance risk for disability leave benefits, special tax and reporting requirements apply. Additionally, employers and third-party payers share responsibility for taxing and reporting disability leave benefits, and it is precisely this shared obligation that frequently leads to confusion and reporting errors.  \nHere, we answer the 10 most frequently asked questions (FAQs) about third-party sick pay.  \nFAQ 1: When are employer-paid disability insurance premiums included in federal taxable wages?  \nFAQ 2: When are disability leave benefits included in wages subject to federal income tax?  \nFAQ 3: How is federal income tax withholding computed on taxable benefits?  \nFAQ 4: When are disability leave benefits included in wages subject to FICA?  \nFAQ 5: Are disability leave benefits included in unemployment insurance taxable wages?  \nFAQ 6: What exactly is meant by the six-month coverage period?  \nFAQ 7: What if the employer changes the amount it pays toward the cost of disability insurance?  \nFAQ 8: Who files the Form W-2: the employer or the  \nthird-party payer?  \nFAQ 9: What are the tax and reporting obligations of the third-party payer?  \nFAQ 10: What are the employer’s tax and reporting obligations?  \nFAQ 1  \nWhen are employer-paid disability insurance premiums included in federal taxable wages?  \nPremiums paid by employers for disability insurance are excluded from wages subject to federal income tax (FIT), federal income tax withholding (FITW), Social Security/Medicare (FICA) and federal unemployment insurance (FUTA). (IRC §106(a).)  \nFAQ 2  \nWhen are disability leave benefits included in wages subject to FIT?  \nGenerally, disability pay is included in federal taxable wages to the extent the employer pays for the cost of the insurance. If the employee contributes to the premium cost, that portion of benefits is exempt from FIT.  \nUnlike FICA and FUTA, taxable disability benefits are included in FIT wages for the duration they are paid. In contrast, FICA and FUTA taxes apply only for the first six-month coverage period. See FAQ 4.(IRC §104(a)(3); IRS Publication 15-A.)  \nExample 1: Employee Sally pays 100% of the disability insurance premium. She receives disability benefits of $500. The $500 is exempt from FIT.  \nExample 2: Randy’s employer pays 100% of the disability insurance premium. He receives disability benefits of $700. The $700 is subject to FIT.  \nExample 3: Rebecca’s employer pays 60% of the premium, and Rebecca pays 40% . She receives disability benefits of $1,000 .$600 is subject to FIT, and $400 is exempt.  \nWatch this. If the employer pays 100% of the disability insurance premium and the employee makes an irrevocable election at the beginning of the plan year to include the employer-paid premium in wages subject to FIT, any disability leave benefits received by the employee at a future date are exempt from FIT. This exclusion applies only to FIT. Taxable disability benefits continue to be subject to FICA and FUTA for the six-month coverage period. See FAQ 4 and FAQ 5.(IRS Reg. §1.104(d)-1(d); Rev. Rul. 2004-55, 2004-26 CB 1081.)  \nThird-party sick pay:  \nthe 10 most frequently asked questions  \nContinued  \nFAQ 3  \nHow is FITW computed on taxable benefits?  \nWhether federal income tax withholding is required depends on which entity bears the insurance risk — the employer or a third party.  \n• Self-insured plan and plans administered by a third party — if the employer bears the insurance risk, FIT is compu","cbCaihxx2gtW31Aq","https://ap.wps.com/l/cbCaihxx2gtW31Aq","pdf",5374678,"English","# Third-party sick pay: the 10 most frequently asked questions\n## FAQ 1-5\n## FAQ 6-10","[{\"question\":\"When are employer-paid disability insurance premiums included in federal taxable wages?\",\"answer\":\"Employer-paid disability insurance premiums are excluded from wages subject to federal income tax, federal income tax withholding, Social Security/Medicare (FICA), and federal unemployment insurance (FUTA), under IRC §106(a).\"},{\"question\":\"When are disability leave benefits included in wages subject to federal income tax (FIT)?\",\"answer\":\"Generally, disability pay is included in FIT taxable wages to the extent the employer pays for the insurance cost; amounts funded by employee contributions are exempt from FIT. Taxable disability benefits are included in FIT wages for the duration paid (unlike FICA and FUTA, which apply only during the six-month coverage period).\"},{\"question\":\"How is federal income tax withholding (FITW) computed on taxable benefits?\",\"answer\":\"FITW depends on who bears the insurance risk. If the employer bears the risk, withholding is computed using the employee’s Form W-4 and regular wage withholding rules (or a 25% supplemental withholding rate may apply when an agent makes the payments). If a third party bears the risk, FIT is withheld only if the employee submits Form W-4S to that third party.\"}]","Third-Party Sick Pay - The 10 Most Frequently Asked Questions | PDF",1789800016]