Third party sick pay is reported to the company by the insurance company that made the payment to the employee. In most cases, the insurance company has withheld Federal Income Tax, Social Security Tax and Medicare Tax and has made the necessary payments to the IRS. The company is liable for FICA Tax, FUTA Tax and State Unemployment. Payments made to an employee by a third party must be included on the employee’s W2.
Set up 3rd Party Sick Pay:
Select Setup>Payroll Items.
Set up an Other Income item for 3rd Party Sick Pay.
Enter a Lookup and Description.
Select a pay account in the Expense Account box.
Select Third Party Sick Pay in the W2 Tracking field.
Leave the W2 Code blank.
Enter the amounts for the employee:
Select Activities>Quick Check or WriteUp>Checks.
Change the check Type to Payroll (ATF).
Assign a dummy check number.
Change the date to 12/31/20XX.
Enter the Wages in the 3rd Party Sick Pay Item and any taxes withheld for the appropriate employee.
If you are posting in a live Write-Up client, make a journal entry to correct the financial statement.
Select WriteUp>General.
Make an entry to credit gross wages, debit withholding tax and cash in bank to reverse the entries made by the dummy check.
Print form 941:
Select Reports>Tax Forms.
Select Federal 941.
Select Print Selected or Preview Selected.
Enter the Federal Withholding from the 3rd party sick pay as a negative number on the FWH Adjustment line.
Enter the FICA Tax Withholding (Social Security and Medicare combined) as a negative number on the Sick Pay line.
Enter any deposits or additional amounts as necessary.
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