My client is self employed and reports his income on Form 1040 Schedule C. The client had 1 clerical employee for which all quarterly payroll taxes returns were filed and of course he had NYS Statutory Disability insurance . The client included coverage for himself under the NYS Statutory Disability insurance policy. In 2013 he made a claim under this NY DBL policy and therefore received 3rd Party Sick Pay. Of course the client didn't give me the 3rd Party Sick Pay report until April 2014 with his personal income tax papers. The insurance company says the client is responsible for making any tax filings such as W-2's, 941, etc and refuses to make any tax form filing on behalf of the client.
So now the issue is how do I report the 3rd Party Sick Pay Wages and FICA and Medi tax withheld in 2013 by the insurance company. Again the client is self employed and doesn't get a W-2 form. I can't report 3rd Party Sick Pay on Form Schedule C because there is no way to take credit for the FICA and Medi Tax withheld already on Schedule SE. Also I'm sure the insurance company must report the 3rd Party Sick Pay as Wages to the IRS.
The only possible solution I can think of is to file a 2013 W-2 form for the self employed owner checking the 3rd Party Sick Pay box. I also would have to amend the appropriate 2013 quarterly payroll tax returns.
Does this make sense to anybody else? I would like some feedback from our members on how they would handle this especially if you've have had prior experience with this issue.
Thank you in advance for your help
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Allen Hoffman
LAWRENCE HOFFMAN, CPA PC
allen @Lhcpapc.com
Tel: 516-625-9051 Roslyn NY
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