Hello
I have a very similar situation regarding my disabled brother. He is permanently disabled since early 2020 and has from that time received any compensation from his employer. Employer paid for third party Disability Policy for which my brother is receiving monthly payments. We included the third party disability payments in his Federal Return. Third party insurer included this income on line 16 of the W2 they issued. Your earlier response indicated that if it is received "in lieu of regular wages" it remains taxable for PA purposes. Specifically, what does term "in lieu of regular wages" mean since the whole issue of taxable vs non-taxable in PA relies on this phrase? Secondly, under which circumstances would disability pay not be considered "in lieu of regular wages"? Knowing this might help me understand the concept.
Thank you
