Question

Are short-term disability payments from a third party insurer taxable in PA? TurboTax is including them, but the PA Dept. of Revenue website says no.

Forum|Forum|7 years ago
June 4, 2019
2 replies
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The following PA Dept. of Revenue site does not distinguish between who pays the premiums for the insurance, but just says that payment from third parties that are not regular wages are not taxable:

https://revenue-pa.custhelp.com/app/answers/detail/a_id/900/~/do-i-pay-state-income-tax-on-sick-pay-...

TurboTax Premier Online

CalCountry

Employee

Notice that the referenced citation first begins with "Sick pay and sick leave are taxable compensation when representing your regular wages." and then goes on to explain "Payments, not representing regular wages, . . ." which seems to include that such non-wage substitution payments made either by the employer and/or a third-party, are not taxable by PA.

Did your employer include the third-party payments in your W-2's box 16?
Was PA income tax withheld from that entire value in Box 16?

Generally, third-party sick/short-term disability payments received in substitution for regular wages remain taxable by a state with an income tax.

A

akipnis1Author

It does not appear the employer included these wages in Box 16. However, we received a separate W-2 from the insurance provider who paid the disability benefit, which were not regular wages, who reported the full amount paid by the insurance company in Box 16, but then no tax was withheld at that time.

J

jaw64

Do I pay state income tax on sick pay and disability payments?

Answer ID 900 | Published 02/15/2003 09:06 AM | Updated 11/30/2020 02:43 PM

Do I pay state income tax on sick pay and disability payments?

Sick pay and sick leave are taxable compensation when representing your regular wages. Your employer must include them as compensation and withhold Pennsylvania tax.

Payments, not representing regular wages, including payments made by third party insurers for sickness or disability, are not taxable income for Pennsylvania purposes. Your employer should not include periodic payments for sickness or disability in Box 16 of your W-2 Form. If your employer includes this income and withholds Pennsylvania tax, you must obtain and submit a corrected W-2 Form or a statement from your employer explaining the error.