Employer's Third Party Sick Pay Agreements Chart

The Employer's Third Party Sick Pay Agreements Chart is a quick reference tool to assist you in determining where and how you must handle Third Party Sick Pay according to the contract that exists between you and your insurance company. This chart defines, in accordance with information published by the IRS, the areas of responsibilities between an employer and an insurance company for the withholding of taxes, reporting of wages, and issuance of W-2s for Third Party Sick Pay.

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Payments by a Self-Insured Employer:

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  • FICA Federal Insurance Contributions Act : up to mandatory limits (for 1st six months only)

  • FIT Federal Income Tax : optional (by employee request)

  • SIT State Income Tax : optional (by employee request)

  • FUTA Federal Unemployment Tax Act

  • SUI State Unemployment Insurance(in some states)

Employer: withholds anddeposits any FICA (both employee and employer), FIT, and/or SIT taxes per agency requirements with employer federal or state EIN Employer Identification Number . Also deposits any FUTA and/or SUI.

Employer: reports all sick pay payments and taxes with all regular wage payments on all applicable tax returns

Employer: includes sick pay payments on employee W-2 as income for FICA, FIT, and/or SIT, as applicable, and any FICA, FIT and/or SIT taxes, as applicable

 

Payments by an Agent (as contracted by employer for paperwork only, reimbursed for payments)

If Employer retains responsibility:

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  • FICA: up to mandatory limits (for 1st six months only)

  • FIT: optional (per employee request)

  • SIT: optional (per employee request)

  • FUTA

  • SUI (in some states)

Employer: deposits any withheld FICA (both employee and employer), FIT, and/or SIT taxes per agency requirements with employer federal or state EIN. Also deposits any FUTA and/or SUI.

Employer: reports all sick pay payments and taxes with all regular wage payments on all applicable tax returns

Employer: includes sick pay payments on employee W-2 as income for FICA, FIT, and/or SIT, as applicable, and any FICA, FIT and/or SIT taxes, as applicable

 

If Agent is contracted to assume responsibility for employment taxes:

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  • Same as above

Agent: withholds anddeposits any FICA (both employee and employer), FIT, and/or SIT taxes per agency requirements with agent federal or state EIN. Also deposits ant FUTA and/or SUI.

Agent: reports all sick pay payments and taxes with other wage payments on all agent tax returns

Agent: gives each employee to whom it paid sick pay a W-2 using agent federal EIN