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Third Party Sick Pay Setup

  • 8 September 2021
  • 2 replies
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Hello,

I was wondering how it is recommended to set up third-party sick pay in Acumatica Payroll? For example, should it be an earning type, a tax attribute, both, etc?

The third-party pays the employee, but we have to withhold appropriate taxes and report wages on both form W-2 and 941.

Thanks!

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Best answer by Olesia Alpeeva 26 November 2021, 15:44

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  • Create expense account X
  • Create earning code – Third Party sick pay using expense account X
  • Create deduction code – Third Party Sick pay deduction using account X in liability

Scenario 1: Employer withholds taxes and submits W2

  • Create adjustment paycheck
  • Enter earning using Third Party sick pay code (make sure account X is used)
  • Enter deduction with the same amount as the earning using Third Party Sick pay deduction code (make sure account X is used)
  • Calculate
  • Go to the taxes tab
  • Adjust the Employee withholding taxes to 0
  • Save
  • Release

Scenario 2: Third-Party withholds taxes, and submits W2

  • Create adjustment paycheck
  • Enter earnings for the amount paid by third party
  • Calculate
  • Remove earnings
  • Go to the taxes tab
  • Adjust the Employee withholding taxes, taxable gross, taxable wage and taxable hours to 0 OR create a new adjustment paycheck and put the amount for Employer taxes in Amount, taxable gross, taxable wage and taxable hours
  • Save
  • Release
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On the 941 Form, the sick pay, Line 8, is manually entered, there is no way to pass this amount from the payroll software. 

To prepare W2/W3:

select the check boxes on the employee payroll settings that indicates that the employee has a third party sick pay  and it should be used in government reporting

 

On the W2, sick pay is indicated by a check box in the company set up on the W3 Information screen. 

 

 

From the preparer, you can also  indicate which employees have third-party sick pay by checking the box in the column labeled Third-Party Sick Pay. 

Then the amount of third-party sick pay that you enter in the company setup will display on the W-3 Form in Box 14.

Then the amount of third-party sick pay that you enter in the company setup will display on the W-3 Form in Box 14.

 

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