Short answer: Taxable third-party sick pay is reported as wages with the Third-party sick pay box checked, and nontaxable sick pay from employee contributions is shown in box 12 with code J. A carrier that is not the employer’s agent must send the employer a sick pay statement by January 15 of the next year.
IRS Publication 15-A sets the reporting, whichever party, employer or carrier, files the W-2 for the sick pay:
- Taxable sick pay is reported as wages, along with any income tax and FICA withheld.
- Box 12, code J, shows sick pay paid by a third party that was not includible in income because the employee contributed to the plan.
- Box 13, Third-party sick pay, is checked only if the amounts were paid by a third party.
Unless the carrier prepares the W-2s itself under a written agreement with the employer, the sick pay statement shows each employee’s sick pay and any income tax and employee FICA withheld. Form 8922 reconciles totals when liability for the employer’s FICA share has shifted between the carrier and the employer. Confirm in the carrier contract who files what, so payroll does not double-report.