If non-taxable

This will cause the amount to print in box 12 with code 'J'.

If taxable:

You will repeat the same process listed above for the following records as well:

If desired, calculate the tax amount due on the payment and enter that figure as an error adjustment on the City Payroll Item for a remaining payroll; otherwise the employee will have to pay the tax later

There is a special field on the 941 for adjustments needed due to Third Party sick payments and how they relate to medicare withholdings. The district should reference the 941 instructions as well as the information in IRS Publication 15-A on these payments as needed.


If the notice from the company indicates FICA tax was withheld, the district will need to contact the agency as it is our understanding most school district employees should not have FICA tax withheld from this payment. The agency will need to correct this and issue a new statement as the employee can not recover the incorrect withholding on a tax return, tax returns are for federal income tax, not federal FICA or medicare.

Revised: 12-Nov-2018