Third Party Sick Pay (THIS IS INFORMATIONAL EXAMPLE ONLY. SAGE IS NOT RESPONSIBLE FOR ASSISTING WITH STATE OR FEDERAL TAX RELATED QUESTIONS. PLEASE CO...
Third Party Sick Pay (THIS IS INFORMATIONAL EXAMPLE ONLY. SAGE IS NOT RESPONSIBLE FOR ASSISTING WITH STATE OR FEDERAL TAX RELATED QUESTIONS. PLEASE CONTACT YOUR ACCOUNTANT FOR ANY TAX ADVICE!!) This article describes how to setup Sage BusinessWorks to follow the IRS guidelines for Third Party Sick Pay reporting. http://www.irs.gov/publications/p15a/ar02.html#d0e1259 To properly enter third party sick pay in Sage BusinessWorks, you will need to know the total amount of sick pay the employee received as well as the Social Security and Medicare taxes you as the employer are liable for. The employer is responsible for the employer’s portion of the FICA tax.
1. IMPORTANT: Back up data files so that you can restore if the results are not acceptable. 2. Set up an other pay for the disability payment paid to the employee. Be sure to select the “Add to gross” check box and the appropriate tax boxes. Assign the other pay to the employee in Maintain Employees. Set up a ‘wash’ account in the General Ledger, and assign it in the other pay. Utilities / Maintain Other Pays
*(Be sure to Note: Sage is not responsible for defining or reconciling your chart of accounts or for determining which general ledger account to use. Please consult your accountant or a Sage business partner who is familiar with the company's chart of accounts.
Third Party Sick Pay
verify the taxable status with your accountant.)
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3. Set up a deduction for the cash portion of the disability payment. Be sure to check the appropriate tax boxes. Assign the deduction to the employee in Maintain Employees. Assign the same wash account in the deduction. Utilities / Maintain Deductions
Note: Sage is not responsible for defining or reconciling your chart of accounts or for determining which general ledger account to use. Please consult your accountant or a Sage business partner who is familiar with the company's chart of accounts.
*(Be sure to verify the taxable status with your accountant.)
*(Be sure to verify the taxable status with your accountant.)
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4. Enter a time card for the employee. Select the other pay (set up in step 2). In the gross amount, enter the total amount of the payment to the employee. Processing / Timecard Entry
5. Run an automatic payroll calculation. Processing > Automatic Payroll Calculation.
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6. Select Processing / Enter Handchecks, and select the employee. Respond ‘Yes’ to “OK to use the calculated check information?” Change any tax values that do not match the values of the actual check. Ensure that the employer and employee liabilities for FICA and Medicare are the correct amounts.
Note the employee portion of the FICA and Medicare.
Ensure the total amount of the payment is in the Other Pay and Use the net check amount in the deduction so that the net check is zero.
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7. Post the zero dollar check so that the information is posted to the employee and company totals. Processing / Enter Handchecks – Post Zero Net Pay Check
Following are the General Ledger postings for the check: No 7215.01 3213.00 3212.00 3213.00 3212.00 3215.00 3223.00 3400.00 3400.00
Third Party Sick Pay
Description / Accounts Payroll Tax Expense, Sales Social Security, Employer Social Security Withheld Social Security, Employer Social Security Withheld Federal Unemployment State Unemployment Other Employee Withholding Other Employee Withholding
Debits 57.32
Credits 46.50 *31.50 10.88 *10.88 4.50 9.69
750.00 692.68
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8. IMPORTANT: The tax liability in the tax deposit window and the General Ledger is
overstated by the employee’s contribution (noted in step 6 above). To account for this in the Payroll module, you will clear only the employee’s portion of FICA and Medicare (noted in step 6 above) without posting to Cash Management module by deselecting to post tax deposits to C/M module. Clearing the employee’s liability without posting to bank reconciliation Payroll > Utilities > Maintain Payroll Parameters > Checks Deselect ‘Post tax deposits to C/M’
Clearing the employee’s liability - Employee portion only Payroll > Taxes > FICA and FWT (941) Deposits
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This tax deposit will NOT post to your bank reconciliation, but will post into the general ledger as follows: Debits 1050.00 3212.00 3212.00
Cash in Checking Social Security Withheld, Employee Social Security Withheld, Employee
Credits 42.38
31.50 10.88
You will now need to make a journal entry to transfer the liability from your cash account to the wash account. This entry will clear your wash account. 1050.00 3400.00
Cash in Checking Other Employee Withholding
42.38 42.38
NOTE: After the liability has been cleared you will need to reset the option to post tax deposits to C/M module to ensure future tax deposit checks are posted to your bank reconciliation
Clearing the employee’s liability – Reset option to post tax deposit checks to C/M
Payroll > Utilities > Maintain Payroll Parameters > Checks Place checkmark in ‘Post tax deposits to C/M’
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COMPLETING FORM 941 – Enhanced Tax Reporting By paying the employee’s portion of the FICA and Medicare, the 941 lines 10 and 11 will be overstated by the amount of the employee’s portion. If all your payroll liabilities have been paid for the quarter, line 14 will show a balance owed equal to the amount that the third party paid. You will need to Adjust Line 8, current quarter’s adjustment for sick pay by entering a negative number to make line 14 equal zero.
Enter the employee portion of OASDI and Medicare liability for sick pay on Line 8 of the 941 Reduce Line 11 Total Deposits by the employee portion of OASDI and Medicare liability
Note: Sage is not responsible for assisting with state or federal tax-related questions. Please contact a tax advisor or accountant for assistance.
Note: Box 2, Box 5a, and Box 5c should all include the additional gross from third party sick pay. If they do not, then you will need to go back and verify the amounts and dates of the “Zero Amount” check.
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Completing the 941 (Schedule B) Schedule B needs to be edited to match Line 10 of the 941.
Edit Schedule B to reduce the liability by the portion of the employee OASDI and Medicare liability. The Schedule B should match Line 10 of the 941.
Note: Sage is not responsible for assisting with state or federal taxrelated questions. Please contact a tax advisor or accountant for assistance.
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Completing the W-2/W-3 in Enhanced Tax Reporting (Payroll > Processing > Enhanced Tax Reporting)
1. Highlight the W-2/W3 form on the list of forms. Select the year and click OK. 2. Click Next on the W-2 Wizard screen. 3. Proceed through the W-2 Wizard making your selections until you get to the W-3 information window. 4. On the W-3 Information screen of the W-2 Setup Wizard, (if applicable) place a checkmark in the ‘Thirdparty sick pay (Box b)’ and enter the amount (IF ANY) of Federal Income Tax Withheld on third party payments and click Next (NOTE: Income tax withheld (Box 14) - complete this box only if you had employees who had federal income tax withheld on third-party payments of sick pay. Any amount entered in this box will appear in Box 14 of the W-3)
Note: Sage is not responsible for assisting with state or federal tax-related questions. Please contact a tax advisor or accountant for assistance.
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Completing the W-2 in Enhanced Tax Reporting, Con’t.
5. Locate the employee on the grid that needs the Box 13 selected for Third Party Sick Pay.
6. In the left pane of the W-2 preparer grid, Place your cursor in the Box A (SSN) cell and scroll or tab to the right until you reach Box 13. Then place a check mark in the Third Party Sick Pay box.
7. Proceed through the W-2 Preparer to complete and print your W-2 forms.
