How do I put my information in for short term disability?

[HelenC12]

Short-term disability benefits are taxable when the premiums are paid by your employer.

• They are not taxable when you pay the premiums.

If the short term disability is on your W-2 or a separate W-2, enter the W-2 and answer any subsequent questions related to your disability payment.

• Generally, the W-2 Box 13, Third Party Sick Pay is checked.

See the following article for additional information: Are Short Term Disability Claim Payments Considered Earnings?

[whitro1164]

Received Third-Party W2 for Short-Term Disability Benefits

I am using 2020 Turbo Tax Deluxe to do my taxes.  I had COVID and was hospitalized for 22 days.   I applied for and received Short Term Disability (STD) for a month and a half from a third-party insurer.  I received a W2 and when I input the third-party W2 info in the Turbo Tax Deluxe software it lower my refund about drastically to the point that I owe federal and state.  I get my STD benefits from my employer as an after-tax. Did I put W2 info in the correct place? There is no where else in the software that ask if I received or was on Short Term Disability during the year 2020. Please assist.

[gloriah5200]

If your employer pays the premiums for your short-tern disability at no cost to you, then it will be taxable to you when received.

If you paid the premiums for your short-term disability out of untaxed money, then the income payments will be taxable to you when received.

If you paid the premiums for your short-term disability out of taxed (after-tax money), then your short term disability payments received should be tax free.

If it does not look correct to you, you should discuss it with your employer to verify.

[017508356]

Hi,

I did not receive any paperwork (W2) for when I was on Short Term Disability.  How do I procure this information ?  Thank you,

Fred Frigault

[JamesG1]

Was the short term disability income reported on your W-2 from your employer?  If not, you may receive a second W-2 from an insurer reporting taxable short term disability.  Contact your regular employer to find out whether you should have received this paperwork.

Taxable short term disability benefits will be reported on a W-2 and, in TurboTax Online, reported under Federal / Wages & Income / Your income / Job (W-2).

Short term disability (STD) payments can take one of two forms. They can be a taxable wage replacement benefit, or a non-taxable insurance benefit.  Whether a STD benefit is taxable or not depends on who is paying the premium to the insurance company.

If your employer pays the premium for the disability insurance product, then any payment you receive is taxable to you as a taxable wage replacement payment. The insurance contract is considered to be a "wage replacement" and not a pure insurance payment.

If you, the employee, purchase the insurance product with after tax money, than the payment of the benefit is not taxable income to you. The payments you receive are not considered to be a wage replacement payment.

@017508356

[ARC371]

Hi @JamesG1!

Similar question for me...

I received a W2 from my employer AND the insurance company I received short-term disability benefits through. 

The employer W2 has my STD gross payments in boxes 1, 16 and 18 (I live in Michigan and work in Pontiac so this is my Federal, State and Local wage boxes, respectively).  They also show the Social security tax and Medicare tax withheld in boxes 4 and 6.  However, they do NOT show the Federal tax that the insurance company withheld in box 2 (I filled out a W4-S to have federal taxes withheld from my STD checks).  I don't understand why the Federal tax is not showing up but everything else is.  The "Third-party sick pay" box is also checked in box 13.

I ALSO received a W2 from the insurance company showing the correct Wages, Federal income tax, Social security tax and Medicare tax withheld (so boxes 1, 2, 3, 4, 5, 6, 16 and 17 have figures in them).  The "Third-party sick pay" box is also checked in box 13.  This W2 is accurate to me.

When I contacted the insurance company, they said they have a tax agreement with my employer so my employer should not be reporting any of my disability information on the W2 they issue to me because that is all reported on a W2 from them (the insurance company).

Is this correct, and my employer needs to update the W2 I received from them to remove the disability payments and Social security and Medicare taxes; and uncheck the Third-party sick pay box?

My employer pays 100% of the disability insurance benefit.  I was on short-term disability for 2 months in 2022.

Thank you!

Aimee

[ShirlynW]

@JamesG1 is giving some great advice. As JamesG1 stated, if the employer paid the disability insurance premium the payment you received is taxable. You would receive a W2- including the wages from the employer or the third-party, not both. Contact your employer and ask for a correct W-2, explain you received a W-2 from the third-party for your STD.

[ARC371]

Perfect; thanks so much, @ShirlynW!  I am in the process of getting my employer to issue me a new W2 removing all STD information.

[ARC371]

@JamesG1 and @ShirlynW 

I'm hoping you, or someone else, can answer this new question.  My LTD company stopped withholding FICA taxes on my payments and I don't want to end up with a big tax bill when I file my 2023 taxes.  My question is: could I, or should I, increase the Federal withholding (which I've opted to have withheld for the same reason, by filling out a W4-S) to make up for the FICA taxes not being withheld anymore?

[JamesG1]

I assume that the six month mark has passed.  Contact your LTD company to make sure.

FICA is withheld from disability benefits paid during the first full six months following the last day the claimant worked for the policyholder immediately prior to the period of disability.  IRS Publication 15A page 20 states:

Payments received after 6 months

The payments received by Dave in July through October aren't subject to social security, Medicare, or FUTA taxes because they were received more than 6 months after the last month in which Dave worked.

FICA taxes are reported on IRS form 941 Employers Quarter Federal Tax Return.

Federal withholding is withholding for income tax reported on your Federal 1040 tax return.  There is no downside to increasing your withholding if you choose that option.  If you increase your Federal withholding, the additional withholding will be returned to you by a larger refund in 2024.

@ARC371 

[ARC371]

Yes, it's been six months.

This is very helpful @JamesG1 - thank you so much!

I'm all set now and have saved that IRS Publication to my files for my 2023 taxes.

Blessings to you for your expertise and service here!