Toast Payroll: Manage Third-Party Sick Pay at Year End

When and how should I submit third-party sick pay (3PSP) for tax filing?

Many employers offer some form of wage protection for employees who are on leave from work i.e. Long Term Disability (LTD) or Short Term Disability (STD). In some cases, a third party, such as an insurance provider, manages paying out sick pay on behalf of the employer. These payments are considered wages and must be recorded and taxed. Depending on the recording, these amounts may be included in box 13 of the Form W-2.

There are three basic scenarios where Toast needs to be involved to record 3PSP for W-2 filing:
 

1. The third-party pays the employee, deducts the employee taxes, and files the Form W-2.
2. The third-party pays the employee, deducts the employee's taxes, but does not file the Form W-2.
3. The third-party pays the employee gross wages and does not file the Form W-2.

Due to the tight turn around on filing at year-end, we ask that you send any third-party sick pay statements as soon as possible to ensure employee Form W-2's are accurate. The deadline to send this info to Toast Payroll is prior to submitting your last payroll of the year so that it can be entered onto a payroll for that year. Select the blue chat button in the lower-right corner of any Toast Payroll page to direct these statements to us. Fees may be incurred if are missed at year end.

This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.