Do I need to pay taxes on short term disability payments while off work?

Thanks for the explanation, but I'm confused about something. What if my employer takes the premium payments for the group policy out of my paycheck? Does that still count as them paying for it, or would that be considered me paying for it with after-tax dollars?

If your employer deducts the premium from your paycheck, it depends on whether that deduction happens before or after taxes are calculated. If the premiums are deducted pre-tax (reducing your taxable income), then the benefits will be taxable when you receive them. This is common with many employer plans and you can usually check your paystub to see if the deduction happened before taxes were calculated. If you paid the premiums with after-tax dollars (meaning they took the money after calculating taxes), then the benefits would not be taxable. Your year-end W-2 and paystubs should help clarify which situation applies to you.

I'm curious - how does this actually work? Do you just upload your documents and it tells you what's taxable? Does it handle other tax situations or just disability stuff?

Sounds interesting but I'm skeptical. Couldn't you just call the insurance company and ask them directly whether the payments are taxable? They should know how they reported them to the IRS.

You upload your tax documents, paystubs, and any insurance paperwork, and it analyzes everything to identify what's taxable and what isn't. It flags inconsistencies too. The system found that my employer incorrectly reported some of my disability pay on my W-2 when it should have been tax-free. It definitely handles way more than just disability situations. It works with all kinds of income documents, deductions, and even complicated situations like self-employment or investment income. The AI can spot patterns across different documents that most people would miss.

How does this even work? I thought it was impossible to get a human on the phone at the IRS. Are you sure this is legitimate and not some scam?

Yeah right. Nobody gets through to the IRS in 20 minutes. Even their callback system takes days. I'm calling BS on this one.

The service basically holds your place in the IRS phone queue so you don't have to stay on the line for hours. When they reach a human agent, they call you and connect you directly to the IRS representative. It's completely legitimate - they don't ask for any tax information or personal details beyond your phone number. It works because they have a system that can handle waiting on multiple lines at once, unlike a person who can only sit on one call at a time. I was skeptical too but it actually works exactly as advertised. No magic, just smart technology that saves you from the hold music torture.

Does anyone know about New York state? I'm on short term disability in NY and can't figure out if I need to pay state taxes on the payments.

New York generally follows the federal rules for taxing disability benefits. So if your benefits are taxable for federal purposes (employer paid the premiums), they're typically taxable for NY state purposes too. New York does have its own temporary disability insurance program, but those benefits follow the same general rule - if you paid for it with after-tax dollars, the benefits are tax-free. If it was employer-paid or paid with pre-tax dollars, the benefits are taxable.

I had the exact same problem! Turns out the insurance company was supposed to file a W-2 for the disability payments, not my employer. I had to call Cigna and request a corrected W-2 specifically for the disability pay. They classified it as "third-party sick pay" on a separate W-2.

You should definitely contact Cigna directly about the missing tax forms. Insurance companies are required to issue tax documents for disability payments when they're taxable, but sometimes there are delays or the forms get sent to an old address. If your employer paid the premiums for the Cigna policy, those disability payments are taxable income and Cigna should have issued either a W-2 or 1099-MISC. Call their customer service line and ask specifically about tax documents for disability benefits - they should be able to reissue them or tell you if the payments were non-taxable (which would mean you paid the premiums with after-tax dollars). Don't file your taxes until you get this sorted out, otherwise you might end up having to file an amended return later.

Great point about workers' comp! I didn't even think about that possibility. Since you mentioned it was a manufacturing injury, @fce70bae54ac you should definitely check if your employer filed a workers' compensation claim too. Workers' comp benefits are generally not taxable, and sometimes they run concurrently with short-term disability. If you did receive any workers' comp payments, make sure you understand how they interact with your disability benefits - sometimes the disability insurance will reduce their payments by the amount you receive from workers' comp (called "offset provisions"). This could affect the total taxable amount you need to report. Also seconding the advice about keeping detailed records. I learned this the hard way when I had to reconstruct my disability payment history months later for my tax preparer.