IRS issues guidance on sick pay paid by third parties

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Tax Hot TopicsIn Notice 2015-6, the IRS said third-party sick pay paid on or after Jan. 1, 2014, must be reported on Form 8922, “Third-Party Sick Pay Recap.”

Sick pay is any amount paid to an employee for any period during which the employee is temporarily absent from work because of injury, sickness or disability. Sick pay does not include disability retirement payments or payments for medical and hospitalization expenses. Third-party sick pay is sick pay that is paid to an employee by some person (the third party) other than the employer for whom services are normally performed.

In general, the payor of the sick pay is treated as the employer for purposes of withholding and payment of Federal Insurance Contribution Act (FICA) payments, Federal Unemployment Tax Act (FUTA) taxes and in some instances, federal income taxes. In the notice, the IRS said that Form 8922 is used for payments made on or after Jan. 1, 2014, instead of Forms W-2 and W-3 third-party sick pay recaps, which were filed with the Social Security Administration for third-party sick pay paid before Jan. 1, 2014. Notice 2015-6 also sets forth the regulatory rules concerning the responsibility for the withholding and payment of employment taxes.

Eddie Adkins
T +1 202-521-1565

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