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Is third-party sick pay taxable?

SOLVEDby TurboTax974Updated December 31, 2021

It depends on whether you paid for the cost of the policy or your employer paid for the policy.

If you paid for the policy: Your third-party sick pay isn't taxable.

  • You might still receive a W-2, but you don't 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, don't 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'll receive a W-2 with taxable wages in box 1 and include this W-2 in your return.

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