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How to Set Up Third-party Sick Pay in QuickBooks?

The payment for the sickness that is received by the employer from the institution other than his/her employer for example insurance provider or trust is called ‘Third-Party Sick Pay”. They are generally also known as short-term disability payments. For setting up third-party sick pay in QuickBooks, you need to follow the below four-step process:

Creation of a New Expense Account in QuickBooks

  1. First of all, click on Lists > then a chart of accounts > select Account > New.
  2. After that, click Add new account > Account type > Expense and then click on continue.
  3. Now under the Add new account screen, you need to enter the name of the new expense account in the Account name field. After that, you just have to click on save and close to finish the process.

Creation of Additional Payroll Item

  1. First of all, click on List > Payroll item list > Payroll item > new.
  2. After that, click on Select setup method > custom setup > Next > addition > Next.
  3. Now you need to enter the name for an additional payroll item in the “enter the name for addition” field in the “Name used in Paychecks and payroll reports” and click on Next.
  4. Now choose the tax tracking type, taxable or non-taxable & third-party sick pay, and click on Next.
  5. Now in the “Calculation based on Quantity” screen choose Neither > and then next.
  6. Select “Net pay” in “Gross Vs. Net window and click on Next.
  7. In the last step, clear and verify that both Default rate and Limit are blank and click on Finish.

Creation of New Deduction Payroll Item

  1. First of all, click on List > Payroll item list > Payroll item > new.
  2. After that, click on Select setup method > custom setup > Next > Deduction > Next.
  3. Now you need to enter the name for additional payroll items in the “enter the name for addition” field in the “Name used in Paychecks and payroll reports” and click on Next.
  4. You need to select the newly created expense account from the liability in the “Agency for Employee-paid liability” window and click on Next.
  5. In the case of a Non-taxable payroll item, in the tax tracking type window, choose none from the drop-down and click on Next, taxes window no taxes should be selected and click on next. After that, you need to repeat steps 5-7 from the additional payroll item process.

Creation of Payroll Check

  1. Click on Employees > pay employees >Unscheduled payroll > Enter payroll information > choose the employee and their name in the employee column.
  2. Put the earning to zero in the “review and create paycheck” window
  3. Now open Preview paycheck window> select the just created additional payroll item in another payroll item field > enter the amount in the rate column.
  4. Click on save and close > create paycheck in review and create paycheck section.

If you need help at any point, you can always use our Live Chat solutions for a quick and effective rectification of any error faced while setting up Third-Party Sick Pay in QuickBooks

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