Final answer:
To have federal income tax withheld from third-party sick pay, an employee should complete Form W-4S. This allows specification of the amount of tax to be withheld by the party issuing the sick pay.
Step-by-step explanation:
To request federal income tax withheld from third-party sick pay, the appropriate form to complete is Form W-4S, Request for Federal Income Tax Withholding from Sick Pay. Third-party sick pay is a payment made to an employee by another party, not the employer, when the employee is temporarily unable to work due to illness or injury.
Employers often pay into state-run funds for workman's compensation insurance, which may provide benefits in such situations. However, when a third party pays sick benefits, the employee can use Form W-4S to specify the amount of federal income tax they wish to have withheld from these payments.
Payroll taxes, such as Social Security and Medicare, are normally split between the employer and the employee, with each paying a portion. When receiving third-party sick pay, certain tax obligations, like the withholding of income tax, still apply and employees must take steps to ensure appropriate taxes are withheld.