Solution Properties
Solution ID:
225924450087711
Last Modified Date:
Fri Jul 24 19:52:27 UTC 2026
Taxonomy Path:
Category//Transactions//Tax
Author:
[email protected]
Account for Third-Party Sick Pay on W-2 and 941 tax forms for Sage 100 Payroll v2.x and higher
Description
Cause
Resolution

 

CAUTION:

CAUTION: Use caution when working with the below product functionality. Always create a backup of your data before proceeding with advanced solutions. If necessary, seek the assistance of a qualified Sage business partner, network administrator, or Sage customer support analyst.

 

 

CAUTION:

CAUTION: Sage support can't assist with third-party products, hardware, report customizations, or state and federal tax questions. Refer to our Scope of Support for more info. Contact your Sage business partner, network administrator, or accountant for assistance.

 

Understand third-party sick pay limitations

Sage 100 doesn’t support third-party sick pay directly. third-party insurer issues payments to employees.
Review IRS guidance and confirm reporting requirements before proceeding.
Note: Refer to IRS Publication 15-A or consult your tax advisor for compliance requirements.

Set up earnings and deduction codes

Create an earnings code

  1. Open Payroll, Setup, Earnings Code Maintenance.
  2. Create a new code for third-party sick pay.
  3. Set the type to Miscellaneous.
  4. Set Tax Rule to -8000039 Regular Wages.
  5. Click Accept.

Create a deduction code

  1. Open Payroll, Setup, Deduction Code Maintenance.
  2. Create a deduction code for third-party sick pay.
  3. Select type Equal to Earnings Code.
  4. Link to the earnings code created earlier.
  5. Click Accept.
This setup reflects wages on W-2 and 941 forms without affecting employee taxes.

Set up a tax profile

  1. Create a Tax Profile in Payroll Setup.
  2. Select the applicable third-party sick pay taxes.
  3. Assign the tax profile in Employee Maintenance.
This setup controls employer tax calculations for third-party sick pay.

Enter third-party sick pay transactions

Use payroll data entry

  1. Open Payroll, Main, Payroll Data Entry.
  2. Select the employee.
  3. enable Manual Taxes checkbox, select No in Print Check.

Enter earnings and deductions

  1. Add a line using the third-party sick pay earnings code.
  2. Select the tax profile in the lower grid.
  3. Add a second line using the deduction code.

Adjust tax values

  1. Open Taxes.
  2. Enter 0.00 for all employee tax amounts.
  3. Run Tax Calculation.

Finalize the entry

  1. Print reports, including the Employer’s Expense Summary.
  2. Update Payroll Check Register.

Adjust employee tax history

Update federal, state, and local records

  1. Open Payroll, Main, Employee Maintenance.
  2. Select the employee.
  3. Click More, then Tax Summary.
  4. Select the Federal record.
  5. Click Detail, then Tax History Detail.
  6. Click Fix.
  7. Adjust employer wages or taxes.
Repeat these steps for state and local records.
Note: Enable Allow Editing of Employee Tax History in Role Maintenance to access the Fix option.

Report third-party sick pay on W-3

  1. Print W-2 and W-3 forms.
  2. In W-3 Information, select Third-party sick pay (Box b).
  3. Enter the employee share of Social Security and Medicare withheld by the third party in Box 14.
This amount appears on line 8 of Form 941.
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Mark employee records

  • Select Third-Party Sick Pay in the W-2 Preparer grid for applicable employees.

Report third-party sick pay on Form 941

  1. Print Form 941 and Schedule B.
  2. Enter the adjustment amount on Line 8.
This amount represents employee Social Security and Medicare taxes withheld by the third party.

 

 

 

[BCB:155:Chat 100 US:ECB]

 

Steps to duplicate
Related Solutions

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How to account for Third-Party Sick Pay on W-2 and 941 tax forms for Sage 100 2017 and prior
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How to print the 941 and Schedule B forms in Sage 100