New Third-Party Sick Pay Recap Filing Procedure, Form Required in 2015

Author: Alice Gilman

October 10, 2014

Employers will be required to file new Form 8922, Third-Party Sick Pay Recap, for sick pay paid to employees by a third-party agent or insurer in 2014 in order to reconcile Forms 941, Employer's Quarterly Federal Tax Return, and Forms W-2, Wage and Tax Statement. Previously, a third-party payer of sick pay filed recap Form W-2, and Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration.

The first Form 8922 is due to the Internal Revenue Service (IRS) by February 28, 2015, or March 2 if filed electronically. Although still in draft form, the IRS expects to release final Form 8922 in December.

Sick Pay Reporting Generally

Sick pay is generally an amount paid under a plan because of an employee's temporary absence from work due to injury, sickness or disability. It may be paid by the employer or a third party, such as an insurance company. Sick pay includes both short- and long-term benefits. Sick pay is not necessarily paid for sick days, which may be paid or unpaid, according to an employer's policy.

Sick pay is usually subject to Social Security and Medicare (FICA) and federal unemployment (FUTA) taxes. Sick pay may also be subject to mandatory or voluntary federal income tax withholding, depending on who pays it. How these payments are reported depends on whether they were made by an employer or a third party. Since two different parties may pay sick pay, a year-end reconciliation is required.

Form 8922 Line-by-Line Instructions

For sick pay paid beginning in 2014, the employer must file Form 8922 with the IRS if the employer reports the sick pay on employees' Forms W-2 under the name and Employer Identification Number (EIN) of the agent or insurer. The employer's agent or insurer must file Form 8922 with the IRS if the employer reports the sick pay on employees' Forms W-2 under the employer's name and EIN.

An employer must take the following steps to complete Form 8922:

    • If the Employer box is checked:
      • The employer for whom the sick pay was paid by the insurer or agent must report, in the appropriate blocks, its name, address, telephone number and EIN; and
      • The employer must provide the name and EIN of its insurer or agent in the blocks marked Other party's name and EIN. If the employer has contracts with more than one insurer or agent, the employer must file a separate Form 8922 for the wages and taxes related to each contract.
    • In Box 1, Sick pay subject to federal income tax, the employer must enter the total amount of sick pay subject to federal income tax.
    • In Box 2, Federal income tax withheld from sick pay, the employer must enter the total amount of federal income tax withheld from the sick pay.
    • In Box 3, Sick pay subject to social security tax, the employer must enter the total amount of sick pay subject to Social Security tax.
    • In Box 4, Social security tax withheld from sick pay, the employer must enter the total amount of Social Security tax withheld from the sick pay.
    • In Box 5, Sick pay subject to Medicare tax, the employer must enter the total amount of sick pay subject to Medicare tax.
    • In Box 6, Medicare tax withheld from sick pay, the employer must enter the total amount of the Medicare tax (including Additional Medicare Tax) withheld from the sick pay.

    An employer that files an incorrect Form 8922 with the IRS must file a corrected form as soon as possible. The employer should complete all the entries on Form 8922 when making corrections and check the "CORRECTED" checkbox at the top of the form.