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Level 1

Employer taxes only on benefits received

We have a terminated employee that is receiving Long-Term Disability and Short-Term Disability benefits.  We received statements from the Insurance Company so we can prepare his W-2 as well as pay the employer portion of the FICA & Medicare taxes for the year.  The insurance company paid the employee portion of the FICA & Medicare taxes already.  How do I process in QuickBooks?  I tried doing a Zero check but it generates the Employee portion of the FICA & Medicare Taxes.

1 Comment

Employer taxes only on benefits received

Hello there, SGoolsby.


It's a delight to help you enter a third-party sick pay which is use to pay for short and long-term disability in QuickBooks Desktop.


You're on the right track in creating a zero net paycheck, SGoolsby. In case you'd like to check if you're doing it correctly, you can follow the steps below:

  1. Create a paycheck, zeroing out any earnings in the Earningbox.
  2. In the Other Payroll Items field zero out any default deductions, addition or company contributions.
  3. Select the new Addition item (with tax tracking of Compensation) created from the drop-down list.
  4. Enter the amount that the employee received as payment from the insurance provider, in the Rate column.
  5. On the next line, select the new Deduction item created from the drop-down list, enter the amount the employee was paid in the Rate column (this will generate a negative net amount due to employee paid taxes).
  6. To advance the employee paid taxes such as Social Security and Medicare Employee, select the payroll created in Step 4 (with tax tracking type of None) on the next line in the Other Payroll Items field, and then enter an amount equal to the negative net amount of the check.

Once done, you can create a company liability adjustment. For a detailed steps on how to do this, here’s an article that you can check on about third-party sick pay and refer to this scenario: Employer reports taxable third-party sick pay on employee W2 and 940/941 that was withheld by the third-party.


If you need help from a live support, feel free to get in touch with our QuickBooks Payroll Team so they can guide you through the whole process of entering a third party sick pay.


Here's how you can get in touch with them:

  1. Go to this link
  2. Click Payroll.
  3. Click View Contact Info.

Let me know if there’s anything else I can help with while entering third-party sick pay in QuickBooks. It's always my pleasure to help.

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