If
it appears you may be entitled to a railroad tax refund, please
read this part of the booklet thoroughly. It will help you
understand what a railroad tax refund is and when one can
be paid.
Definition
of a Railroad Tax Refund
If the railroad taxes the RRB receives are
greater than the amount which will affect the annuity amount,
the employee can receive a refund of the additional railroad
taxes. Generally, the additional railroad taxes will be paid
when the employee begins receiving a railroad retirement benefit.
If the employee dies before receiving a refund, the additional
railroad taxes are payable to the employee’s survivors. An
application for a railroad tax refund must be filed by the
second anniversary of the employee’s death. The two types
of railroad tax refunds, excess and separation allowance,
are described in the following sections.
Excess
Tax Refund
If the employee had railroad employment
and employment covered by the Social Security Act in the same year,
both railroad retirement and social security taxes may have been
deducted from the employee’s earnings. Excess taxes that were
deducted from the employee’s earnings in the years between 1950 and
1974 can be refunded by the RRB. Excess taxes that were deducted for
years after 1974 must be refunded by the Internal Revenue Service.
Separation Allowance Tax Refund
If the employee received a separation
allowance or severance payment after 1984, it is possible the
payment will not produce additional service credits. If additional
service is not credited, the Tier 2 payroll taxes that were withheld
from the payment, may be refunded.
People
Eligible To Receive a Railroad Tax Refund
The railroad tax refund is paid to an
employee’s survivors according to the following priorities:
- The widow(er) of the employee
who was living with the employee at the time of the employee’s
death. If there is no qualified widow(er), the unpaid railroad tax
refund can be paid to:
- the
employee’s children. If no
children survive the employee, the unpaid railroad tax refund can
be paid to:
- the employee’s
grandchildren. If no grandchildren survive the employee,
the unpaid railroad tax refund can be paid to:
- the
employee’s parents. If no
parents survive the employee, the unpaid railroad tax refund can
be paid to:
- the
employee’s brothers and
sisters. If no brothers and sisters survive the employee, the
unpaid railroad tax refund can be paid to:
- the
employee’s estate.
If there is more than one person in the
category of people to whom the unpaid railroad tax refund is being
paid, the unpaid railroad tax refund will be split equally among all
the qualified people in that category.
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