Chapter 9:
Form ID-6, Transmittal of Tier I Tax Transactions
on Sickness Benefits
Legislative background |
An amendment to the Social Security Act in 1981
provided that certain sick pay is subject to
social security taxes. Corresponding legislation
amended the Railroad Retirement Tax Act and
provided that certain railroad sickness insurance
benefits paid after December 31, 1981 are subject
to railroad retirement Tier I and Medicare taxes.
Included are sickness benefits paid under the
Railroad Unemployment Insurance Act (RUIA).
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| Employers pay
share of tax on RRB sickness benefits |
Upon
notice, an employer must pay the employer share
of Tier I tax due on sickness benefits paid
by the Railroad Retirement Board (RRB.) Form
ID-6 is the employer's notice of tax due.
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| Form ID-6 |
The
RRB notifies railroad employers each month by
Form Letter ID-6 of the amounts of benefits paid
subject to Tier I tax. The notice contains a list
showing:
1) the gross amount
of taxable sickness benefits paid to each
employee;
2) the amount of the
Tier I tax withheld by the RRB; and
3) the applicable month
and year.
Upon
notification by the RRB, the employer should
remit its share of taxes to the Internal
Revenue Service (IRS) unless the carrier
has already paid the maximum Tier I creditable
compensation for the employee for the year.
In such a case, the employer should remit the
employer share of Medicare tax.
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| Form ID-6s |
At
the end of the year, Form ID-6s, Summary Transmittal
of Tier I Tax Transactions on Sickness Benefits,
is sent to employers summarizing the Forms ID-6
sent during the year.
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| RRB sickness
benefits and Form CT-1 |
Employers
should report on Form CT-1 their matching Tier
I tax payments made on RRB sickness benefits.
The RRB withholds the employee Tier I tax
from sickness benefits and remits the taxes
on a daily basis to the IRS. The RRB files Form
CT-1 with the IRS to report employees' Tier
I tax on sick pay.
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| RRB sickness
benefits and Form BA-10 |
The
RRB, not the employers, completes Form BA-10,
Report of Miscellaneous Compensation and Sick
Pay, in order to credit employees' service and
compensation records with the creditable sickness
benefits paid under the RUIA.
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| What sickness
benefits are subject to tax? |
Sickness
benefits under the RUIA are subject to Tier I
taxes if:
- The benefits are paid before
the end of the 6-month period immediately
following the month in which the employee
last worked; and
- The benefits are not paid
for an on-the-job injury.
Benefits
for days of sickness within the taxable period
that are paid after
the end of the period are not taxable. The date
of payment, rather than the date of sickness,
is controlling.
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| Examples of
taxable period |
Employee
A became sick on May 15. The taxable period begins
on May 15 and ends on November 30, the last day
of the sixth month following the month in which
the employee last worked.
Employee B is furloughed on March 15 and begins
claiming unemployment benefits. On August 25,
the employee is injured in an off-duty car accident.
The taxable period begins March 15 and ends
September 30, the last day of the 6-month period
following the month in which the employee last
worked.
Employee C breaks an ankle playing softball
after work on February 5 and returns to work
March 15. On December 7, the employee becomes
ill and does not return to work. One taxable
period begins February 5 and ends March 15,
when the employee returned to work. A second
taxable period begins December 7 and ends the
following June 30.
Employee
D last worked and became ill on January 8. The
taxable period is January 8 through July 31.
The employee first qualified and applied for
benefits beginning July 1. The first payment,
covering the days July 1 through July 28, is
processed on August 1, which is outside the
taxable period. Although benefits are payable
for days within the taxable period, taxes are
not withheld because the benefits are paid after
the taxable period ended.
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| Recovery of
sickness benefits |
If taxable
sickness benefits become recoverable for any reason,
the after-tax net amount (the amount actually
paid to the employee) is the amount recoverable
from the employee. The amount of Tier I taxes
that were withheld by the RRB and paid to the
IRS is claimed as a credit against future RRB
payments to the IRS.
The employer
would also be entitled to take a credit of the
amount of Tier I taxes remitted by the employer
in their next deposit. Notice of benefit credits,
if any, are included with the Form ID-6 sent
to the employer each month.
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