The W-2 is reporting third-part sick pay, also referred to as short-term disability.
The payments are taxable as wages on both the Federal and State returns.
You have entered the W-2 correctly with "Third party sick pay" checked. There is no option to select short-term disability for that W-2.
According to the state of California:
WHAT IS THIRD-PARTY SICK PAY? Third-party payers, such as insurance companies or trusts, who pay sick pay in place of wages. These payments are made to employees under a plan established for a participating employer during any period when an employee is absent from work due to illness or injury. These payments are sometimes known as short-term disability payments
Section 931.5 of the Section 931.5 of the California Unemployment Insurance Code (CUIC) (leginfo. legislature.ca.gov/faces/codes.xhtml) provides that third-party sick payments are “wages” for the purpose of reporting Unemployment Insurance (UI) and Employment Training Tax (ETT). These payments are also reportable as Personal Income Tax (PIT) wages, which are wages subject to California PIT. Even though PIT withholding on these wages is not mandatory, the wages are considered taxable income to the recipient and must be reported on the recipient’s California income tax return. Without exception, payments for third-party sick pay are not subject to State Disability Insurance* (SDI).
CA LINK
**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"
