Self Insured Workers Comp

[ToledoEd]

I have a client, public employee who works for a local goverment. They were injured on the job and are receiving "Disability Pay", which is 100% of their normal pay. They received a w2 for the full amount of their pay, including the disability pay. I remember being able to reclassify some of this pay as in leu of Workers Compensation and not pay tax on it, based on the fact that the employee would qualify for Works Comp if the government unit was not self insured. Can anyone help me remember the steps needed for this? The last time I remember doing this was in the early 90's with a person who worked for the same government employer, but in a different department. Monday I can call the employer's payroll department, but am trying to remember where to look.

Thanks for your time.

[erchess]

Box 13 of W2

Is Sick Pay checked and if so what is the effect of ticking that box on your computer screen?

[JG EA]

Would Sec 104(a) apply?

[oceanlovin'ea]

Don't have time to look it up right now.....but I thought if company paid for sick pay or short or long term disability, it is taxable.

Not taxable if the employee pays the premiums.

If that were the case, then company pays for coverage and it would be taxable.

Just a thought. Can look it up later.

Linda, EA

[BP.]

if company paid for sick pay or short or long term disability, it is taxable.

Not taxable if the employee pays the premiums.

I have followed this rule also, but as an aside on this thread, I did learn something new about this subject this year.

Client had her short term disablity benefit payments included as taxable W-2 income this year. She thought that since she paid for the coverage, her benefits were tax free. She brought me in all her payroll & benefit documents which showed that she got pre-tax treatment for the insurance premiums under her employer's cafeteria plan. Premiums for the short term disablity coverage were excluded from her income. I hadn't seen that before. Luckily I had TTB p. 3-19 to shed light on it for me and the client. She was satisfied about the answer.

[oceanlovin'ea]

that is interesting.

That is an interesting turn of events. We really have to look at things from all sides now.

Thanks for the tip.

Linda, EA