I was pulled from work and on NYS short term disability for 6 months. How do i claim this income?

[SundayInSalem · Accepted solution]

It depends. Disability income may or may not be taxable, depending on who paid the premiums. If your disability is taxable, the taxable amount is generally included on your W-2 or Form 1099.

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. So, if you pay the entire cost of a sickness or injury plan with after-tax money, you do not need to pay tax on payments you receive under the plan as income.

If your employer pays half the cost of premiums and does not deduct these payments from your pay, then you most likely need to report half the payments received as taxable income. Reimbursement of medical costs you’ve paid for after the plan was established are generally not taxable, but may reduce the amount of any medical costs deduction.

For more info see this awesome TurboTax article Are Short-Term Disability Claim Payments Considered Earnings?

[jpic]

I have a similar question - my former employer didn't include the disability payments on my W2 anywhere and the insurance company who paid the disability payment says they should have.  I've asked them to correct the W2, but they're dragging their feet - where do I enter the disability amount if they don't amend the W2?

[MarilynG1]

If your employer does not issue a Corrected W-2, you can add the income to your tax return as follows:

• Log in to your account and go to your return
• Click on Federal
• Wages & Income
• I'll choose what I work on 
• scroll to Less Common Income
• select Start (or Update) for Miscellaneous Income
• Select "Other income not already reported on a Form W-2 or Form 1099"
• Click through till you get to "Employee compensation that was not reported on a W-2"

Here's more info on Reporting Disability not on W-2. 

[ARC371]

Hi @MarilynG1!

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?  Or can I just make that correction in TurboTax without a W2-C from my employer?

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

Thank you!

Aimee

[MarilynG1]

It sounds like everything was duplicated on your two W-2's except Federal Tax withheld.   I would agree with you that you should enter the W-2 from the insurance company, showing taxable payments and tax withheld. If your employer W-2 has a Box 18 amount and the insurance company W-2 does not, add that amount to your entry. 

However, the issue with the IRS is that if you have a W-2 with an amount in Box 1, they expect to see that reported on your tax return (they do  document matching).  So, you should definitely contact your employer and relate what the insurance company told you that they were the correct issuer of your W-2.  Be sure to document your conversation with them (date, time, who spoken to, etc.) and how/when they said they would resolve your issue.  If possible, get a Case number. Save documentation of your contact with the insurance company, too. 

If they agree to send you a 'Corrected W-2'  you could enter the insurance company W-2 in TurboTax.  From what you say,  your corrected Employer W-2 should only contain a check in Box 13, with a notation in Box 14, and an amount.  This would be saved for your records, and would not affect your tax return, and would not need to be entered in TurboTax. 

You could wait until you receive the Corrected W-2 to file, though, so the IRS is not looking for your other W-2 if they receive your return before the Corrected W-2 is issued; however, it's up to you if you decide to file with one W-2 since you have documentation for your situation. 

Here's more info on Multiple W-2's (though not exactly the same situation as yours). 

[ARC371]

Thanks @MarilynG1.  I'm not sure I followed everything you shared.

Either way, I think it would be best to wait until my employer corrects my W2.  I know I'm missing out on the savings as today is the last day to file for that.  But it's okay.  I'd rather everything be corrected before I file.  I have saved all the emails so I still have documentation as well.

And I thought they have to remove the STD information entirely.  So I'm confused what you mean by this:

...your corrected Employer W-2 should only contain a check in Box 13, with a notation in Box 14, and an amount.  This would be saved for your records, and would not affect your tax return, and would not need to be entered in TurboTax. 

So my employer W2 still needs to have the Third-Party Sick pay box checked?  What amount would show in box 14?  The gross STD pay I received (box 1 of the W2 I received from my insurance company)?

Thank you for your help!

[MarilynG1]

Box 14 is just a 'catch all' for Employer Notes.  They could note STD and the amount you were paid here, but with no amount in Box 1, the W-2 does not get entered into TurboTax.   It would be just for your records.

@ARC371 

[ARC371]

Sorry, but I'm still confused @MarilynG1.

I received other wages from my employer prior to my leave and only received one W2 (which included wages earned while working AND my STD payments).  So you're saying they should correct my first W2 to remove all STD information so it just shows the wages and taxes earned while I was working; and then issue a second W2 that only has the gross amount of my STD payments in box 14 and box 13 Third Party Sick pay checked?  But is that really necessary if I received a W2 from the insurance company?  Couldn't my employer just correct my W2 to remove all STD payments and taxes and uncheck box 13?

[AbrahamT]

So, according to Marilyn, the only thing you need from your former employer is really just an indication of how much of that Box 1 of your wages was applicable to the disability pay benefits and that would show up as checkmarked in Box 13 with an amount in Box 14 and is for your records only. Because the whole issue is that your former employer forgot to include your federal tax withheld, you are inputting that information from the W2 issued to you by the insurance company. But your'e now saying something else. There was other earnings that you received from your former employer on that Box 1, was that included on Box 1 from the insurance company already? In other words, what was included on that Box 1 from your prior employer vs. to what was included on that Box 1 from your insurance company.  From your earlier conversations, it sounded like it was all part of Box 1 from the insurance company's W2 and the only thing that was missing was the federal tax withheld on your employers W2. Or, was it just the ST disability money on that Box 1 from the insurance company?  

[ARC371]

@AbrahamT - I received two W2s. 

One from my employer which included earnings prior to my disability AND my disability payments and taxes (all but the Federal tax they withheld).

And a second W2 from the insurance company (that is all correct) showing my disability payments and ALL taxes they withheld.

From my understanding of what I've been told by others, since I received an accurate W2 from the insurance company, my employer just needs to update my W2 to remove all STD payments and taxes withheld and uncheck the 3rd Party Sick pay box (in box 13).

But @MarilynG1 stated my employer needs to keep that box checked and also add "STD" and the amount I was paid in Box 14.  I just don't see why that is necessary and think it would be confusing.

[AbrahamT]

In that case, then just get a corrected W2 from your employer with the std payment included in that Box 1along with all the earnings from your employer how he reported initially. Also include the federal taxes witheld from both the earnings  from both your employer and the std payments. Also, the fica and ss and medicare payments withheld from both of these amounts in Box 2,4 and 6 respectively.Box 13 and Box 14 will only tell you how much from Box 1 is the std payments but will "not" have a taxable effect because it's already included in Box 1. 

[ARC371]

@AbrahamT I disagree.  After speaking with others, I'm going to proceed with two W2s.  No changes to the one my insurance company issued, and my employer is correcting theirs to remove ALL STD information.