This pay continuance would only be nontaxable if these payments were from an insurance plan that you paid for. Otherwise, if this money came from the employer, it would be taxable to you.
If you paid for the policy: Your third-party sick pay is not taxable.
- You might still receive a W-2, but you do not 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.
If you receive a W-2 like the above, do not include it in your return. If you try to e-file and include this W-2, the IRS will reject your return.
- If your employer paid for the policy: Your third-party sick pay is taxable.
- You will receive a W-2 with taxable wages in Box 1, and you will include this W-2 in your return.
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