Nontaxable sick pay

If an employer pays for a portion of a third-party sick pay plan, employees are taxed on the percentage of the employer cost. This amount is added to the total amount in Box 1.

You must report nontaxable third-party sick pay in Box 12 of your W-2 form. If employees receive sick pay from a third-party and the employees pay the entire cost of a sick pay plan, the amount of sick pay they receive from that plan is not taxable to them.

The amount of nontaxable third-party sick pay prints with a code J in Box 12 of the W-2 form.