Sick Pay Reporting on New Form 8922 Clarified by IRS

Author: Alice Gilman

January 23, 2015

The IRS has issued Notice 2015-6 to address several issues concerning the new Form 8922, Third-Party Sick Pay Recap, released last year. Beginning with sick pay paid to employees in 2014, employers and third parties no longer file recap Forms W-2, Wage and Tax Statement, with the Social Security Administration to report third-party sick pay paid to employees. Instead, employers and third parties now file Form 8922 with the IRS.

Notice 2015-6 also clarifies that a third party is the employer's agent for purposes of sick pay, regardless of whether that third party files Form 2678, Employer/Payer Appointment of Agent, to request authorization as an agent to perform other acts on the employer's behalf.

Reporting Sick Pay

Special rules apply to reporting sick pay to the federal government. Sick pay is considered taxable to an employee and reported on his or her Form W-2, Wage and Tax Statement. However, how these payments are reported depends on whether they were made by the employer, the employer's third-party agent or a third party who is not the employer's agent. Since two different parties may pay sick pay, a year-end reconciliation is required. Form 8922 is now used to reconcile those payments.

According to the notice, whether the employer or the third party files Form 8922 depends on which entity files Form W-2 with respect to the sick pay. The form should be filed by:

  • The employer, if the sick pay is reported on Form W-2 under the third party's name and Employer Identification Number (EIN), regardless of whether the third party is the employer's agent; or
  • The third party, if the sick pay is reported on Form W-2 under the employer's name and EIN.

For example, the requirement to file Form 8922 can arise in one of three scenarios:

  1. A third party is required to file Form 8922 when it is liable to withhold the employee's portion of Social Security and Medicare (FICA) taxes, regardless of whether it is also liable to withhold the employee's income taxes. The liability for the employer's share of FICA tax, and for reporting sick pay on Form W-2, is transferred to the employer.
  2. An employer is required to file Form 8922 when the third party withholds both the employee's share of FICA and income taxes. The liability for the employer's share of FICA tax is transferred to the employer, and the employer and third party have agreed to have the third party act as the employer's agent for Form W-2 reporting purposes.
  3. A third party agent of an employer is required to file Form 8922 when the agreement between the agent and employer provides that the agent will withhold and pay the employee's share of FICA taxes and report those taxes on the agent's Form 941, Employer's Quarterly Federal Tax Return, and the employer will pay its own share of FICA taxes, report the taxes on its Form 941 and report the employee's wages on Form W-2.

If there is no split reporting of sick pay on Form 941, Form 8922 does not have to be filed. And, except for the third scenario above, an employer's agent generally has no obligation to file Form 8922 with respect to the sick pay it pays. There is also no obligation to file Form 8922 when the third party paying the sick pay is not an agent and does not transfer liability for the employer's share of FICA taxes on the sick pay to the employer.

The party required to file Form 8922 must include its name, address and telephone number as the filer's name. If the employer files Form 8922, it shows the name and EIN of the third party paying the sick pay for which there is split reporting.

The rest of the form should be completed as follows:

  • In Box 1, report the sick pay that is subject to federal income taxes.
  • In Box 2, report the federal income tax withheld, if any, from the sick pay.
  • In Box 3, report sick pay subject to Social Security taxes.
  • In Box 4, report the Social Security taxes that were withheld from sick pay.
  • In Box 5, report sick pay subject to Medicare taxes.
  • In Box 6, report the Medicare taxes withheld.