3rd party sick pay.

[Debi]

I have 2 w-2's with third party sick pay. One has all taxes withheld the other none. Are both reportable on line 7? Does this return need to be paper?

[TAXNJ]

Disability Payments and Sick Pay
Payments for sickness or injury, including disability pension payments, are not taxable if the taxpayer paid for the plan. If both the taxpayer and employer paid, only the amount received due to the employer’s payments is reported as income. If insurance premiums are paid through a cafeteria plan, the employee is considered to have paid the premiums only if the benefits were included in income. See IRS Pub. 907, Tax Highlights for Persons With Disabilities.

see TTB 3-19

[TAXNJ]

Why are you asking if return needs to be "paper"? Is there more information not shown in the post?

[Snaggletooth]

Source of W-2

Presumably, the source (most likely an insurance company) should know whether the employee took advantage of the S.125 deduction. Most employees do - this means the sick pay is taxable and shows up on a W-2. If not, there should be no W-2 and no taxation.

The very existence of a sick pay W-2 means the issuer believes the pay is taxable to the employee.

[ATSMAN]

I would not automatically assume that the disability payment is taxable without first inquiring about the source of payments and if it was a private disability policy in which you paid after tax premiums.