Whether the payments are taxable depends on how and
when they are paid. If all or a portion is taxable, the taxable portion
will be reported on your W-2 that is issued by your employer, or
reported on a Form W-2 issued by the insurer. All Form W-2's must be given to the employees by January 31.
If you and your employer share the cost of a disability
plan, you are only liable for taxes on the amount received due to payments made
by your employer.
1. If you pay the entire cost of a sickness or injury plan with
after-tax money, you do
not need to report any payments you
receive under the plan as income.
2. If
your employer pays half the cost of premiums and does not
deduct these payments from your pay, then you
most likely must report half the payments received
as income.
3. Reimbursement
of medical costs you’ve paid for after the plan was established are not
taxable, but may reduce the amount of your medical costs deduction.
"A Form W-2 must be prepared even
if all of the sick pay is nontaxable" see http://www.irs.gov/publications/p15a/ar02.html#en_US_2014_publink1000169582.
