Help re: Third-party sick pay

[MariaR08]

Help... I have a client that I e-filed their 2008 return and it's been accepted already. I just realized one of their W-2s had wages reported in box 1, tax withheld in box 2 and so on thru box 6 respectively. BUT, their is a check mark on box 13 under Third-party sick pay, and in box 14a and 14b it has the wages reported that are listed in box 1 as well.

I didn't check off "Third-party sick pay" in my tax software (ProSeries) when I entered this information... what can happen? What should I do?

Any advice/comments appreciated

Maria

[Koss]

Sick Pay

The error may have no consequence at all.

Or it might be something significant. You need to determine whether properly accounting for the sick pay would change the tax liability, or anything else on the return.

My guess is that on the federal return, it probably won't change anything. But I still need to think about this for a bit... I'm not awake yet [LOL].

I've worked on a couple cases over the years where I discovered that some sort of disability pay, which was reported on Form 1099-R, was actually considered earned income. It was appropriate to report the income on Line 7 instead of... well, whatever that other line is, for pension distributions (16, maybe?). It was actually earned income for purposes of EIC, which is pretty remarkable.

But your third party sick pay is already on Form W-2, and it's already reported as wages. So this obviously isn't the same issue. But I wonder if maybe third party sick pay is not considered earned income for EIC... Or for other issues, such as... well, say, for example, determining whether the taxpayer is eligible to contribute to an IRA.

You're out in California... which is almost another country. [LMAO] I can't even speculate as to what impact the sick pay might have on the state return.

Whatever you do, if you find that checking that box properly doesn't change the federal return, then don't try to file an amended federal return. You'll only confuse the client and the IRS.

BMK

[MariaR08]

Hey there,

I ran a check last night and the "third-party sick pay" check mark doesn't have any impact on the Federal return nor the State. My client made too much to even qualify for EIC so no impact there either.

I assume I should be okay... however, I will try and research this a bit more as well.

Thanks!

~Maria

[Gene V]

This is what my software says about checking the box for third-party sick pay.

Select the box (or enter 1) if the third-party sick pay box is checked on Form W-2, line 13. This entry is only necessary on electronically filed returns.

[Koss]

No impact, but...

Maria's original concern was that she had filed an electronic return and had accidentally failed to check the box.

The box certainly should have been checked. But Maria determined that checking the box would not have changed anything on the return. And Gene is essentially saying the same thing.

I don't think there's any way to fix this type of error. It's a data entry error and nothing more.

If it happens on a regular basis, it could be construed as a form of noncompliance with the IRS e-file regulations. The ERO is required to submit an electronic version of Form W-2 that accurately reflects all information that is present on the paper W-2.

But as an isolated incident, I don't think it will become a compliance issue.

BMK

[MariaR08]

Thanks for coming back with another response, I appreciate it!

~Maria