Get your taxes done using TurboTax

It depends on whether you paid for the cost of the policy or your employer paid for the policy. You said that you did not contribute anything to this. The guidelines are that if your employer paid for the policy, then the third-party sick pay is taxable income.

If your employer paid for the policy: Your third-party sick pay is taxable. You'll receive a W-2 with taxable wages in box 1 and include this W-2 in your return.

If you paid for the policy: Your third-party sick pay isn't taxable.

• You might still receive a W-2, but you don't need to report the W-2 as long as all of the following apply:
  • Box 1 – Wages is $0 or blank
  • Box 12 has Code J
  • Box 13 – Nontaxable sick pay is checked

From a TurboTax Help article about disability payments:

Disability paid by an insurance company for things like lost wages, loss of limb, or loss of sight may or may not be taxable, depending on circumstance:

• If the premiums were paid by your employer and weren't included in your taxable income, the disability is taxable
• If you paid the premiums out of your own pocket or with payroll deductions that came out of your after-tax income, the disability isn't taxable
• If you and your employer jointly paid the premiums, only the disability amount covered by your employer's payments are taxable