Third-party sick pay (TPSP) - overview

Alerts and notices

For payroll compliance (annually licensed)

This article explains how to manage third-party sick pay (checks for sick pay that are provided by insurance companies or other third parties) using Accounting CS.

Employer’s liability for matching FICA and FUTA tax on third-party sick pay

Deposits for the employer portion of the Social Security taxes, Medicare taxes, and the FUTA tax must be made using the employer’s name and EIN.

Entering payroll checks as third-party sick pay

Use the following steps to enter historical payroll data for an employee who received third-party sick pay (TPSP).

  1. Choose Actions > Enter Transactions.
  2. Enter the payroll checks for each employee, either separately or as monthly, quarterly, or annual totals.

    Note: You can use each employee's regular payroll item - you don't need to set up a special one for third-party sick pay.

  3. Mark the Handwritten checkbox to specify the check as being already printed.
  4. Press Enter to save the check.
  5. Click the Generate Liabilities for Handwritten Payroll checks link at the bottom of the screen.
  6. In the Generate Liabilities dialog, use the Filter field to filter the list of handwritten payroll checks that are available to generate liabilities. The Checks grid displays the list of all handwritten payroll checks for the current client that meet the criteria you specified in the Filter field and for which liabilities have not already been generated.

    Note: You cannot generate liabilities for any checks when the Do not create tax liabilities checkbox is marked on the Payroll Taxes tab on the Setup > Clients screen.

  7. From the Select the check type field choose 3rd Party Sick Pay.

    Note: If the employee type is Independent Contractor, the check will not be associated with any employer taxes and will therefore not generate any liabilities.

  8. Mark the checkboxes next to the checks for which you want to generate liabilities as third-party sick pay.
  9. Press the Generate button.

Note: The liabilities generated for the selected checks will be open for all employer taxes (ERFICA-SS, ERFICA-MED, FUTA, and in some instances, SUI and Local). No liabilities will be generated for employee taxes (including FICA-SS and FICA-MED).

Using these steps, third-party sick pay checks will have no effect on the balance of the bank account nor will they be included in the Reconcile Bank Accounts process.

Printing forms

  • Form 941. The application automatically excludes the federal withholding from line 3 and places the employee FICA amounts in the line 8, Current quarter’s adjustment for sick pay.
  • Form 944. The application automatically excludes the federal withholding from line 2 and places the employee FICA amounts in line 6, Current year’s adjustment for sick pay.
  • W-2. The application marks the Third-Party Sick Pay checkbox in Box 13.
  • W-3. The application enters the federal withholding amount in W-3 Box 14, Income tax withheld by payer of third-party sick pay.
  • Form 940, 943, and state unemployment forms. The application treats third-party sick pay the same as any other pay.

Printing payroll reports

When printing payroll reports, you can choose to exclude TPSP information by adding a filter.


In this example, we'll run the Payroll Journal report and choose to exclude third-party sick pay information.

  1. Choose File > Print Reports.
  2. Select the Payroll Journal - Detailed report.
  3. In the Filtering and Sorting section, click the Payroll tab.
  4. In the Filter by field, choose Status. In the Method field, choose is not. In the Selected field, choose Third-Party Sick Pay.
    Exclude TPSP filtering
  5. Preview or print the report.

See also: Report Designer: Options for firm reports

Related topics

Entering historical payroll data

Paying liabilities

Entering individual payroll checks

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