How do I enter 3rd Party Sick Pay?

Notes:

• Consult your tax adviser on the effects of third-party sick and disability wages on your government reports. You may need to adjust the Deposit Summary report for the 3rd party sick pay or adjust on the 941 report for the employee portion paid by the 3rd party.
• You must manually adjust the 941 Schedule B to include these amounts. If you cannot enter checks for third-party sick pay and disability wages before you close the year and enter the new year's payroll, you will need to issue checks for a prior year. For additional information, select the appropriate link below.

You will need to verify with your tax accountant or insurance plan provider which taxes are exempt from the disability payment.  Typically Long Term Sick Pay may not be subject to the same taxes as short term Third Party sick pay.  Because of those tax differences, you will setup a different Pay ID to use for Long Term Sick pay.

Create a new pay ID, LTINSURPAY.

1. 1. From the Setup menu, select Pays.
   2. Type LTINSURPAY, and then press the TAB key.
   3. Type a description, LONGTERM SICK PAY and then press the TAB key.
   4. In the Pay type list, select Other.
   5. In the Calculation method list, select Flat Amount.
   6. Check the boxes under Employee taxes exempt and Employer taxes exempt that this pay is exempt from.
   7. Click OK, click Save, and then click Close.

Set up the employee as a third party sick pay recipient.

1. 1. From the Setup menu, select Employees.
   2. Enter the employee ID of an employee that must report third party sick pay on their W-2 form, then press the TAB key twice.
   3. Click the Misc. Info tab.
   4. Select the 3rd party sick check box.
   5. Click Save, and repeat steps 3b through 3e for each employee that must report third party sick pay on their W-2 form.
   6. Click Close.

Enter a manual check for the third party pay amount.

1. 1. From the Tasks menu, select Enter Checks.
   2. Click List, select the employee, and click OK.
   3. Type the period end date, and press the TAB key twice.
   4. Use the LTINSURPAY pay ID for the amount of disability wages paid by the insurance carrier.
   5. Click Process, clear the Check check box, and then click OK.
   6. Click Tax. Verify that the taxes which did calculate are correct and accurate.  You may only see Employer paid FUTA_E and SUI_E. 
   7. Click Manual and enter the check number and date in the Check number and Check date boxes.
      Note: The Check date determines which period the check posts to in Payroll.
   8. Click Accept check, and repeat steps 4b through 4k for each employee who receives third party sick pay.
   9. Click Finish.

How do I add a third-party sick pay and disability wages in Payroll?
How do I issue checks for a prior year after I have updated taxes?
How do I issue Payroll checks for a prior year if I have not updated taxes?
How do I recalculate subject-to amounts for prior year totals?

Remember to enter your Sick Pay Adjustments on your 941 form.  Currently that information is entered on box 8 of the current form and is titled:  Current Quarter's adjustment for sick pay.