Is W-2 Third Party Sick Pay taxable in Illinois although no State information is even entered on the W-2? Is this a Schedule M Item subtraction item?

[cstogin]

I have a W-2 for US Railroad Retirement Board Sickness and Unemployment Benefits with Gross Wages in Box 1.  Box 13 has "Third Party Sick Pay" box checked.  There is Nothing in the State boxes 15, 16 and 17.  Is this item Taxable in the state of Illinois?  Should I include it as a Schedule M subtraction item line 35. Has anyone seen this before?  Thank you for any assistance.

[itonewbie · Accepted solution]

If it's taxable for federal, it's taxable to IL (assuming your client is an IL resident).  There's no such modification under IL ST CH 35 §5/203(a).  May have just been an omission on the W-2.

[garman22]

I agree with my friend above.

More often than not, insurances fail to include wages in Box 16. If it is taxable at the federal level it is taxable in Illinois. 

[cstogin]

I went to the Railroad Retirement Board and it specifically states that Railroad Retirement Sick Benefits are not taxable at the State Level and to attach a copy of either a 1099-G or W-2 to the State Return.  So, for Illinois on Schedule M there is line item #35 just for this Non-Taxable sick pay as a Subtraction item to Income.  

[garman22]

care to share illinois cite?

[garman22]

https://www2.illinois.gov/rev/research/legalinformation/letterrulings/it/Documents/2012/it-12-0026.p...

I found this. Read this as you will and make up your own mind re: if its taxable or not.

[cstogin]

Thank you.  I did find that information as well the other day.  Based on the research presented I will take the deduction on the State Tax Return.  Here is the website I found regarding this matter: https://www.rrb.gov/sites/default/files/2018-04/QA1802.pdf (See Item #18)

[itonewbie]

Thanks for sharing, guys!  This is really obscure.  The Admin Code subsection cited in the GIL does not even refer to sickness benefits but I suppose 45 USC 352(e) has blanket coverage for the various benefits.

Good learning.

[garman22]

@cstogin Thanks for sharing. I think I would have honestly taxed it and this is my own state. Although, I have never seen RRB sick pay.