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Part
1 - General Information
Section
1A: Railroad Retirement Annuities
A railroad retirement annuity is an amount paid monthly to retired (age or
disability) railroad employees by the United States Railroad Retirement Board
(RRB). The RRB also pays annuities to spouses, divorced spouses, and survivors
of retired or deceased railroad employees.
Section
1B: Railroad Retirement Annuity Components
A railroad retirement annuity may include one, more or all of the following
annuity components depending on age and eligibility requirements:
- Tier 1,
- Tier 2,
- Vested Dual Benefits (VDB),
- Supplemental Annuity Benefit.
The tier 1 component of a railroad retirement annuity may be composed of two
portions depending on the beneficiary’s age and type of annuity:
- the Social Security Equivalent Benefit (SSEB) portion,
- the Non-Social Security Equivalent Benefit (NSSEB)
portion.
Section
1C: Social Security Benefits
The RRB also pays social security benefits to entitled beneficiaries based
on certification from the Social Security Administration
(SSA). The tier 1 portion of a railroad retirement annuity is reduced for social
security benefit entitlement. The SSA, not the RRB, releases annual tax
statements reporting social security benefits paid for a tax year.
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Part
2 - Taxation of Railroad Retirement Annuities
Railroad retirement, survivor and disability annuities consisting of tier 1,
tier 2, and VDB components, have been subject to United States Federal income
tax since January 1, 1984. Supplemental annuities have been subject to
United States Federal income tax since November 1, 1966.
However, tier 1, tier 2, and VDB benefits payable for the period before December
1983; Separation Allowance Lump Sum Amount (SALSA) payments;
Residual Lump Sum (RLS) payments; Lump Sum Death (LSDP)
payments; and excess tier 2 tax refunds are considered nontaxable
payments for Federal income tax purposes. The term "nontaxable"
means that the amount is not subject to Federal income tax.
Refer to the Form
RB-21, "Lump Sum Death, Residual Lump Sum, Annuities
Unpaid At Death," for further information concerning
the definition, eligibility, and necessary proofs for these
types of railroad retirement payments. These amounts are
not reported on any tax statement issued by the RRB.
The term "tax free" only applies to the portion of otherwise taxable
NSSEB and tier 2 (contributory amounts) payments that are
not taxable for Federal income tax purposes based on employee
contributions recovery rules. See Section
3A, "Employee Contribution Recovery," for
more information about employee contribution recovery.
According to Section 14 (45 U.S.C. Section 231m)
of the Railroad Retirement Act, railroad retirement, survivor, and disability
annuities are not taxable for state income tax purposes.
Section
2A: Taxation of Annuity Components
- Social Security Equivalent Benefit (SSEB)
Portion of the Tier 1 Component
The SSEB portion of tier 1 is equivalent to the amount that SSA would pay if
railroad service were covered under the Social Security Act. The special guaranty
amount is a special computation (also called the "overall minimum"
formula) which guarantees that the railroad retirement annuity is not less than
what would be paid in social security benefits. The SSEB portion of tier 1 and
the special guaranty amount are treated as social security benefits for Federal
income tax purposes.
The amount of your SSEB portion of tier 1 or the special
guaranty subject to Federal income tax depends upon your
income exceeding a certain level. To determine if these
benefits are taxable, refer to the social security benefits
worksheet in the
Instructions for Form 1040 and/or Form 1040A Booklet(s)
from the Internal Revenue Service (IRS). For more detailed
information, get IRS
Publication 915, Social Security and Equivalent Railroad
Retirement Benefits.
- Non-Social Security Equivalent Benefit (NSSEB)
Portion of Tier 1, and Tier 2 Components
The NSSEB is the amount of tier 1 that exceeds the SSEB portion of tier 1.
The tier 2 component of a regular railroad retirement annuity is based solely
on the retired employee’s railroad service. The NSSEB portion of the tier
1 component, and the tier 2 component of a railroad retirement annuity are treated
like contributory pensions for Federal income tax purposes. The total of the
NSSEB and tier 2 components is referred to as the "contributory amount."
The taxability of your NSSEB portion of tier 1, and the tier 2 for Federal
income tax purposes depends upon:
- your annuity beginning date (ABD): This is the earliest
date permitted by law or a date that you designated from
which the RRB begins paying you a railroad retirement
annuity,
- the type of annuity that you are receiving,
- whether your employee contributions are
- recovered or not recovered,
- whether you were granted or not granted a period of
disability,
- the type of method you use to figure the taxability
of your annuity.
See Section 2B: "Contributory and Non-Contributory
Pension," for more information on contributory pensions. See
Part 3: "Employee Contributions," for more information on employee
contributions and the methods to determine taxability. See
Part 6: "Taxation of Special Railroad Retirement Payments," for
more information on the taxation of special payments.
In addition, to determine if the NSSEB and tier 2 are taxable,
get IRS
Publication 575, Pension and Annuity Income (Including
Simplified General Rule) or
IRS Publication 939, Pension General Rule (Nonsimplified
Method).
The VDB is the component of a regular railroad retirement annuity that is payable
in addition to the tier 1 and tier 2, to individuals who were eligible for both
railroad and social security benefits prior to 1975.
The VDB component of a railroad retirement annuity is fully taxable for Federal
income tax purposes and is treated like a non-contributory pension. See Section
2B: "Contributory and Non-Contributory Pensions," for more information
on non-contributory pensions.
A supplemental annuity is an annuity in addition to the regular annuity payable
to railroad retirement employees who have a current connection with the railroad
industry; who completed at least 25 years of creditable railroad service; and
who retired before their closing date. The closing date for most employees
is the last day of the month following the month in which age 65 is attained.
The supplemental annuity is fully taxable for Federal income tax purposes and
is treated like a non-contributory pension. See Section
2B: "Contributory and Non-Contributory Pensions," for more information
on non-contributory pensions.
Section
2B: Contributory and Non-Contributory Pensions
A portion of the railroad retirement annuity is similar to a social security
benefit. The other portions are similar to contributory and/or non-contributory
pensions for Federal income tax purposes.
Contributory pensions are based on contributions from the employee (wage earner).
Contributory pensions are only taxed on the amount of the pension that exceeds
the amount of contributions made by the employee. The NSSEB portion of tier
1, and tier 2 benefits are considered contributory pensions for Federal income
tax purposes. See Part 3: "Employee Contributions,"
for more information regarding the taxability of the NSSEB portion of tier 1,
tier 2 benefits, and employee contributions.
Non-Contributory pensions are not based on contributions from the employee.
The VDB and supplemental annuity benefits are non-contributory pensions.
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Part
3 - Employee Contributions
Employee contributions are the amount of railroad retirement taxes paid by
the railroad employee that exceeds the amount that would have been paid in social
security taxes if the employee’s railroad service had been covered under the
Social Security Act. It is not an amount or income that you received during
a tax year. Employee contributions are also referred to as the "employee’s
contribution amount."
Section
3A: Employee Contribution Recovery
The taxability of contributory pensions depends on whether the employee’s contribution
amount has been recovered and the type of annuity being paid.
The employee’s contribution amount is fully recovered when the total tax free
NSSEB and tier 2 amounts paid in railroad retirement annuities to the employee
or family members equal the employee’s contribution amount. At that time, any
additional NSSEB and tier 2 paid exceeds the employee contributions, and are
fully taxable. However, this does not apply to 1986 General Rule annuitants.
See Section 3C: "General Rule Method," for
more information concerning the General Rule and 1986 General Rule annuitants.
The Three-Year Rule and the General Rule are the two methods used to recover
the employee’s contribution amount. Both methods are explained below.
See Part 6: "Taxation of Special Railroad Retirement
Payments," for more information on the taxability of special annuity types
Section
3B: Three-Year Rule Method
The Three-Year Rule provision of the Internal Revenue Code applied to annuities
that began before July 2, 1986. Under the Three-Year Rule, the NSSEB and tier
2 become fully taxable only after the total of these benefits paid to all beneficiaries
on the employee’s wage record exceeded the employee’s contribution amount.
The Three-Year Rule also applied only if the employee’s contribution amount
could be recovered within a 36 month (or 3 year) period.
This method does not apply to beneficiaries filing for annuities at the present
time. We do not have any beneficiaries under the Three-Year Rule currently receiving
a railroad retirement annuity.
However, if a beneficiary was previously entitled to an annuity, all or some
of the employee contributions may have been recovered at the time of that previous
entitlement under the Three-Year Rule. If all of the employee contributions
were recovered at that time, then the entire pension amount is taxable under
the new annuity entitlement. If only some of the employee contributions were
recovered at the time of that previous entitlement under the Three-Year Rule,
then any unrecovered employee contribution amount at the end of the Three-Year
Rule entitlement is used to determine the tax free portion of the NSSEB and
tier 2 under the 1986 and/or 1987 General Rule. See Section
3C: "General Rule Method," below.
Section
3C: General Rule Method
There are two categories of annuitants covered under the General Rule Provisions.
The first category, referred to as 1986 General Rule annuitants, includes those
with ABD’s from July 2, 1986, through December 31, 1986. These annuitants are
entitled to a permanent tax free amount for the life of the annuitant even after
the employee contributions are actually recovered. The second category,
referred to as 1987 General Rule annuitants, includes all annuitants with an
ABD after December 31, 1986. These annuitants are entitled to a temporary tax
free amount. This temporary tax free amount ends when the employee contributions
are fully recovered.
The NSSEB/tier 2 components of a spouse annuity or the NSSEB portion of a divorced
spouse’s annuity are fully taxable from the ABD. No part of a spouse’s NSSEB/tier
2 or a divorced spouse’s NSSEB is used toward recovery of the employee’s contribution
amount under the General Rule Method.
There are two methods of determining the tax free and taxable portions under
the General Rule: 1) the Nonsimplified Method, and 2) the Simplified Method.
The Nonsimplified Method consists of a series of complex calculations and was
initially the only method to use. A description of this
method and when to use it is explained in IRS
Publication 939, Pension General Rule (Nonsimplified
Method).
In 1988, the IRS introduced another method of computing taxable and tax free
amounts for General Rule cases called the Simplified General
Rule or the Simplified Method. The computations under the
Simplified Method are less complex than the Nonsimplified
Method. To see if you qualify to use the Simplified Method,
refer to IRS
Publication 575, "Pension and Annuity Income (Including
Simplified General Rule)." Young widow(er)s,
minor children and students who have fixed periods of entitlement
cannot use the Simplified Method.
If you plan to use the Simplified Method, refer to the Simplified General Rule
worksheets in the Instructions
for the Form 1040 and/or Form 1040A Booklet(s) to determine
your tax free amount. For more detailed information, get
IRS
Publication 575, "Pension and Annuity Income (Including
Simplified General Rule)."
The RRB does not provide or compute the tax free amount of your railroad retirement
annuity.
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Part
4 - Tax Withholding Applied to Your Railroad Retirement
Annuity
The RRB applies Federal income tax withholding to railroad retirement annuity
payments. The tax withholding amount is computed and based on citizenship and
residency, marital status, and tax withholding allowances. The RRB does not
consider the tax free portions of NSSEB and tier 2 annuity components when calculating
Federal income tax withholding.
For further information on Federal income tax withholding based on citizenship
and residency, see Section 4A: "U.S. Citizen
and Resident Tax Withholding," and Section
4B: "Nonresident Alien Tax Withholding."
In addition, refer to Booklet TB-25,
Tax Withholding and Railroad Retirement Payments, for more
detailed information regarding tax withholding on railroad
retirement annuity payments.
Section
4A: U.S. Citizen and Resident Tax Withholding
A United States citizen, for Federal income tax purposes, is an individual
born or naturalized in the United States, Guam, the U.S. Virgin Islands, Puerto
Rico, or the Northern Mariana Islands. A resident alien of the United
States for Federal income tax purposes is an individual who legally resides
in, but is not a citizen of, the United States, Guam, the U.S. Virgin Islands,
or the Northern Mariana Islands.
The RRB allows citizens and legal residents of the United States, Guam, the
Northern Mariana Islands, and citizens of Puerto Rico to
elect to have Federal income taxes withheld on their railroad
retirement annuity payments. To have taxes withheld on the
pension portions of your annuity, a tax withholding election
must be filed on Form RRB
W-4P, "Withholding Certificate For Railroad Retirement
Payments."
Beginning January 1, 1997, you can voluntarily choose to have Federal income
tax withheld from your SSEB portion of tier 1 benefits.
To make this choice, complete IRS
Form W-4V, Voluntary Withholding Certificate, and send
it to the RRB. You can choose withholding on your SSEB portion
of tier 1 benefits at the following rates: 7%, 15%, 28%,
or 31%.
You may request the RRB to withhold an additional amount of taxes from your
annuity. This amount is in addition to the tax withholding amount computed from
IRS tax table rates but may not exceed the amount of your pension components.
If you elect to have taxes withheld, you may control the amount of taxes withheld
from your regular monthly or accrued annuity payments. Be sure to specify your
marital status and number of withholding allowances on the Form RRB W-4P.
If you make an election, it will remain in force until changed or revoked. You
can change or revoke your election by filing a new Form RRB W-4P and/or IRS
Form W-4V at any time. You are not required to file these forms.
You may elect not to have taxes withheld from your railroad retirement annuity
payments on Form RRB W-4P and/or IRS Form W-4V only if you reside within the
United States, Guam, Puerto Rico, the U.S. Virgin Islands, or the Northern Mariana
Islands. If you live outside of these areas and are subject to U.S. citizen
tax rules, you cannot elect "no" tax withholding.
If you do not file a Form RRB W-4P, the RRB is required by law to calculate
and withhold taxes on the pension portions of your annuity
(NSSEB, tier 2, VDB and supplemental annuity) as if you
were married with three withholding allowances. This is
called mandatory citizen tax withholding. The RRB does not
initiate mandatory citizen tax withholding unless annuity
components paid in a month exceeds a minimum mandatory withholding
amount. This amount changes each year based on the new IRS
tax table rates. Refer to the latest Booklet TB-25,
Tax Withholding and Railroad Retirement Payments, for the
minimum mandatory withholding amount and more information
on tax withholding.
We encourage our beneficiaries who are U.S. citizens to
submit a signed statement stating their citizenship and/or a Form RRB-1001,
Nonresident Questionnaire, before moving outside the United States. This is
to avoid mandatory nonresident alien tax withholding being applied to the railroad
retirement annuity. For more detailed information, get IRS
Publication 593, "Tax Highlights for U.S. Citizens and Residents Going
Abroad."
NOTE
- If a U.S. citizen resides or moves outside the
United States or Guam and has not filed Form RRB-1001, Nonresident
Questionnaire, claiming U.S. citizenship, taxes will be
withheld at a mandatory nonresident alien tax withholding
rate until Form RRB-1001 or a signed statement declaring
U.S. citizenship is received at the RRB. U.S. citizens
residing in countries other than the United States, Guam,
the U.S. Virgin Islands, Puerto Rico, or the Northern Mariana
Islands cannot refuse tax withholding.
Section
4B: Nonresident Alien Tax Withholding
A nonresident alien is an individual who is neither a citizen nor a resident
of the United States, Guam, the U.S. Virgin Islands, or the Northern Mariana
Islands, and is not a citizen of Puerto Rico. As prescribed by the Internal
Revenue Code, nonresident aliens are subject to a mandatory tax withholding
rate of:
- 30% of 85% of the SSEB,
- 30% of the NSSEB and tier 2,
- 30% of the VDB, and
- 30% of the supplemental annuity.
The United States has a number of tax treaties with other countries that may
result in reduced tax withholding, or, in some instances, no tax withholding
for citizens or residents of those other countries. In order to take advantage
of such a tax treaty, you must claim an exemption based on a tax treaty in effect
between the United States and your country of legal residence. A tax treaty
exemption must be renewed every three years. Form RRB-1001, Nonresident
Questionnaire, should be completed by a nonresident beneficiary in order to
furnish to the RRB:
- Citizenship;
- Residency; and
- Tax treaty claim exemption information.
You are required to file a Form RRB-1001. However,
any nonresident beneficiary is assumed to be a nonresident
alien if a Form RRB-1001 is not filed. The mandatory tax
withholding rate prescribed by the Internal Revenue Code
is applied to railroad retirement annuity payments. Contact
the nearest RRB field office, an American Consulate or an
American Embassy if you need help obtaining and/or completing
Form RRB-1001, Nonresident Questionnaire, or if you need
to submit proof of your legal residence. If you are a U.S.
citizen, refer to the latest Booklet TB-25,
Tax Withholding and Railroad Retirement Payments, for the
minimum mandatory tax withholding amount and more information
on tax withholding.
As a nonresident alien, you are not required to file a U.S. Federal income
tax return if:
- your entire tax liability was fulfilled by withholding
of U.S. Federal income tax on benefit payments;
- your only income from sources within the United States
was not connected to a trade or business; and
- the correct amount of tax for the correct period was
withheld.
However, you may wish to file a U.S. Federal income tax return to receive a
refund if too much tax was withheld from your payments. Also, if you were a
resident of the United States during a given tax year, you may be required to
file a U.S. Federal income tax return. For additional information on filing
requirements for nonresident aliens, get IRS
Publication 519, U.S. Tax Guide for Aliens.
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Part
5 - Repayments
A repayment is an amount of money that:
- you paid back to the RRB, or
- you returned to the RRB, or
- the RRB withheld from your railroad retirement annuity
and/or payments to repay a debt.
Generally, most repayments are in response to annuity overpayments.
NOTE
- If a beneficiary receives an annuity payment with tax
withholding as an annuity deduction and that same beneficiary
was not entitled to that annuity payment, then the beneficiary
must pay back the annuity payment and the tax withholding
amount.
The RRB withholds money from the annuities of those beneficiaries who elect
tax withholding and when mandatory tax withholding rules apply. This money is
deposited in an account with the U.S. Treasury and reported to the IRS for each
beneficiary. The annuity paid during the tax year AND the amount withheld in
taxes are shown on the beneficiaries’ annual tax statements at the end of the
year, so the beneficiaries receive credit for the taxes withheld.
SSEB repayment amounts are reported on Form RRB-1099
or Form RRB-1042S tax statements regardless
of whether the SSEB amounts repaid were reported as taxable payments when originally
paid to the annuitant. The IRS allows the use of SSEB repayment credit in these
situations.
NSSEB, tier 2, VDB and/or supplemental annuity repayment credit only applies
if the NSSEB, tier 2, VDB and/or supplemental annuity repaid was previously
reported to the IRS as a taxable payment. If the NSSEB, tier 2, VDB, and/or
supplemental annuity repayment amount was not reported and not taxable when
originally paid to the annuitant, then the annuitant cannot take repayment credit.
If the total repayment reported on the Form RRB-1099-R
tax statement for a given tax year exceeds $3,000.00, the annuitant may exercise
a "Claim of Right" as explained in IRS
Publication 575, Pension and Annuity Income (Including Simplified General
Rule). Contact the RRB to find out what years and annuity components the repayment
represents if you need to determine what credit to take for the repayment amount.
Refer to IRS Publication 575, Pension and Annuity Income (Including Simplified
General Rule), for additional information regarding NSSEB, tier 2, VDB and supplemental
annuity repayments. See Part 7, Annual Tax Statements, for information concerning
the Form RRB-1099-R tax statement.
Over-reimbursements occur when the annuitant pays back
more money in any one of the annuity components than he/she
should have paid back. When the RRB receives an over-reimbursement,
the RRB pays the annuitant the over-reimbursement amount
as a nontaxable one payment only (OPO). Therefore, the amount
of the over-reimbursement may not be considered a repayment.
Section
5A: Social Security Equivalent Benefit (SSEB) Portion
of Tier 1
Under the Internal Revenue Code, the RRB can give repayment credit for the
SSEB portion of tier 1 for any tax year. A SSEB repayment amount is any SSEB
amount repaid, returned or recovered for payments issued prior to death.
This includes tier 1 payments issued for the period prior to December 1983.
SSEB repayment amounts are attributable to the year in which they are repaid
to the RRB.
In some situations, the total SSEB benefits that you repaid to the RRB are
more than the gross SSEB benefits that you received. This
can result in a negative amount being reported as paid in
item 5 of Forms RRB-1099 or RRB-1042S tax statement.
If you received more than one Form RRB-1099, Form RRB-1042S
or Form SSA-1099 tax statement representing the same tax
year, you may use a negative amount from one tax statement
to offset a positive amount reported on another tax statement
representing that same tax year. Please refer to IRS
Publication 915, "Social Security and Equivalent
Railroad Retirement Benefits," or IRS
Publication 519, "U.S. Tax Guide for Aliens,"
for further information about negative amounts and SSEB
repayments.
NOTE
- Unlike the SSEB component, the taxable amount reported
for the NSSEB, tier 2, VDB, and supplemental annuity for
any tax year cannot be negative. This is regardless of the
amount of the repayment.
Section
5B: Non-Social Security Equivalent Benefit (NSSEB) Portion
of Tier 1, and Tier 2
The NSSEB portion of tier 1, and tier 2 repayments consist of amounts repaid,
returned or recovered for payments issued prior to death. NSSEB and tier
2 repayments may be composed of taxable and tax free amounts. There are tax
implications when considering NSSEB/tier 2 repayments. The way repayments are
handled depends on the amount of the repayments and the tax years to which the
repayments apply, and whether the benefits that you repaid were taxable income
for those tax years after December 1983.
Section
5C: Vested Dual Benefit (VDB)
VDB repayments consist of amounts repaid, returned or recovered for payments
issued prior to death. VDB repayments effective December
1983 may be creditable for tax purposes.
Section
5D: Supplemental Annuity
Supplemental annuity repayment amounts consist of amounts
repaid, returned or recovered for payments issued prior
to death. Supplemental annuity repayments effective November
1966 may be creditable for tax purposes.
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Part
6 - Taxation of Special Railroad Retirement Payments
Section
6A: Disability Annuities
If you retired on a disability annuity, payments you receive
are fully taxable as wages until you reach minimum retirement
age. Minimum retirement age is the age at which you could
first receive an annuity were you not disabled. Beginning
on the day you reach minimum retirement age, you may determine
if you are entitled to a tax free portion of your contributory
pension components. See Part 3: Employee Contributions,
for more information on tax free portions of contributory
pension components.
Minimum retirement age for RRB disability annuitants is
attained at age 60 with 30 or more years of service, or
at age 62 with less than 30 years of service. Under the
General Rule, when minimum retirement age is attained, part
of the NSSEB portion of tier 1, and tier 2 is tax free.
The other part of the NSSEB portion of tier 1, and tier
2 is taxable, regardless if you were or were not granted
a period of disability.
If you were granted a period of disability, the period
of disability may affect the taxability of your tier 1 benefit.
Refer to the section below and Form RB-1d,
Employee Disability Benefits, for more information concerning
a period of disability and the requirements for a period
of disability.
The entire tier 1 benefit is treated as an SSEB benefit
from the point of the effective date of the period of disability
plus a five month waiting period, if a period of disability
is granted in the same tax year as the annuity beginning
date (ABD) or if the period of disability is granted in
a year before the ABD. In these instances, the entire tier
1 amount paid from that point on is treated as a SSEB benefit
for taxation purposes and will be reported on an annuitant’s
annual tax statement Forms RRB-1099 (for annuitants taxed
as citizens or legal residents of the United States) or
RRB-1042S (for annuitants taxed as a nonresident alien).
Please see Part 2: Taxation of Railroad Retirement Annuities,
for more information regarding the taxability of the SSEB
portion of a tier 1 benefit.
However, if an individual's period of disability began
in a year after his/her ABD, a portion of the tier 1 benefit
from the point of the effective date of the period of disability
plus a five month waiting period, will be treated like SSEB
benefits while the other portion may be treated like NSSEB
benefits (contributory pension) for taxation purposes. The
SSEB and NSSEB portions of tier 1 may affect the amount
of any taxes withheld from the annuity. The annuitant will
also receive a Form RRB-1099-R annual tax statement reporting
the amount of the NSSEB portion of tier 1. Please see Part
2: Taxation of Railroad Retirement Annuities, and Part 3:
Employee Contributions, for more information regarding the
taxability of the NSSEB portion of tier 1, and tier 2.
If you were not granted a period of disability and you
are under age 60 with 30 years or more of service, or under
age 62 with less than 30 years of service, your entire tier
1 is treated as NSSEB benefits for taxation purposes until
minimum retirement age is attained. In these instances,
the NSSEB portion of tier 1, and tier 2 are fully taxable
from the ABD. When minimum retirement age is attained, part
of the NSSEB portion of tier 1, and tier 2 is tax free while
the other portions of NSSEB and tier 2 are taxable.
Please see Part 2: Taxation of Railroad Retirement Annuities,
and Part 3: Employee Contributions, for more information
regarding the taxability of the NSSEB portion of a tier
1 benefit, and tier 2.
For further information concerning disability annuities,
periods of disability and eligibility requirements, get
Form RB-1d,
"Employee Disability benefits," from any RRB field
office.
Section
6B: Spouse, Divorced Spouse or Widow(er) with Child
in Care
Under General Rule Provisions, for widow(er)s who were
paid as a spouse for part of the year, only the annuity
payments received as a widow(er) are used to compute the
tax free portion of the annuity payments.
For a spouse or widow(er) under age 60 who has a child
under the age of 16 in his or her care, the tier 1 portion
of the railroad retirement annuity is considered all SSEB
for Federal income tax purposes.
The tier 1 portion of the railroad retirement annuity is
considered all NSSEB if the tier 1 is not payable under
the rules established by the SSA. An example of tier
1 considered as all NSSEB occurs when the child under a
spouse or widow(er)’s care turns age 16 and is not disabled.
SSA would not pay this spouse or widow(er) a benefit, so
the tier 1 the RRB pays is all NSSEB.
For annuitants under the General Rule provisions, the NSSEB/tier
2 components of a spouse annuity or the NSSEB component
of a divorced spouse annuity are considered fully taxable
from the annuity beginning date. No part of a spouse’s NSSEB/tier
2 or a divorced spouse’s NSSEB can be used toward recovery
of the employee’s contribution amount.
For more information concerning the General Rule, refer
to Section 3C: "General Rule
Method."
Section
6C: Partition Payments
Railroad retirement annuities are subject to court approved
partition payments. These payments are made to third party
individuals.
A partition payment is based on a court decree of divorce,
annulment, or legal separation, or on a court-approved property
settlement, with which the RRB must comply. The portion
of the railroad retirement beneficiary’s annuity that can
be subject to partition and paid to a third party are the
special guaranty amount or the tier 2 component, the VDB,
and supplemental annuity. For Federal income tax purposes,
the partition amount is taxable to the third party payee
and not to the railroad retirement beneficiary. The third
party payee can elect tax withholding on the partition payment.
Section
6D: Garnishment Payments
Railroad retirement annuities are subject to court approved
garnishment payments. These payments are made to third party
individuals.
A garnishment is the result of a a legal proceeding, based
on a court order, whereby a portion of the railroad retirement
beneficiary’s annuity is allotted to a third party as payment
for alimony or child support. For Federal income tax purposes,
the garnishment amount is taxable to the railroad retirement
beneficiary and not to the third party payee.
Section
6E: Workers’ Compensation Payments
Workers’ compensation payments are made because of a work-related
injury or disease. They are paid under a state or Federal
Workers’ Compensation Law or plan. Payments may be for total
or partial disability and paid on a temporary or permanent
basis. The workers’ compensation amount is usually based
on a percentage of the worker’s wages. Workers’ compensation
benefits are deducted from the railroad retirement annuity
tier 1 payments. For Federal income tax purposes, the gross
SSEB paid amount reported on Form RRB-1099 (for U.S. citizens)
or Form RRB-1042S (for nonresident aliens) tax statements
are before any workers’ compensation offset. The taxable
NSSEB amount is after any workers’ compensation offset amount.
The entire workers’ compensation offset amount for the year
is reported on the Form RRB-1099 or Form RRB-1042S tax statements
for informational purposes. Also, there is no repayment
credit for overpayments due to workers’ compensation offset
amounts.
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Part
7 - Annual Tax Statements
Section
7A: Railroad Retirement Annuity Payments
The Internal Revenue Code requires that an annual statement
of benefits be released to each citizen beneficiary by January
31 and each nonresident alien beneficiary by March 15 of
the year following the close of the tax year. The annual
tax statement shows, as appropriate, the amount of benefits
paid, the amount of benefits repaid, the total amount of
Federal income taxes withheld, the employee contribution
amount, the rate of tax, and the country of legal residence
for the taxable year. The RRB also provides this information
to the IRS.
You may receive more than one tax statement depending on
the type of benefits paid. Each tax statement should be
considered when you file your income tax return. If you
receive a corrected tax statement, then do not use the original
tax statement when you file your income tax return. If you
are required to file an income tax return, a negligence
penalty or other sanction may be imposed on you if the income
is taxable and the IRS determines that it has not been reported.
The RRB issues the following three basic tax statement
forms to report annuity payments:
- Form RRB-1099;
- Form RRB-1042S;
- Form RRB-1099-R
The RRB issues annual citizen tax statements to citizens
and/or legal residents of the United States, Guam, the U.S.
Virgin Islands, the Northern Mariana Islands, and to citizens
of Puerto Rico. A citizen’s railroad retirement annuity
is reported on Form RRB-1099 and/or Form RRB-1099-R. A citizen
beneficiary will receive one of the following three possible
tax statement combinations:
- Form RRB-1099 only or
- Form RRB-1099-R only or
- Form RRB-1099 and Form RRB-1099-R
The RRB issues annual nonresident alien tax statements
to individuals who are neither citizens nor legal residents
of the United States, Guam, the U.S. Virgin Islands, the
Northern Mariana Islands, nor citizens of Puerto Rico. A
nonresident alien’s railroad retirement annuity is reported
on Form RRB-1042S and/or Form RRB-1099-R. A nonresident
alien beneficiary will receive one of the following three
possible tax statement combinations:
- Form RRB-1042S only or
- Form RRB-1099-R only or
- Form RRB-1042S and Form RRB-1099-R
Form RRB-1099 is the tax statement which documents the
SSEB portion of tier 1 and special guaranty information
for citizens and/or legal residents of the United States,
Guam, the U.S. Virgin Islands, the Northern Mariana Islands,
and citizens of Puerto Rico. SSEB benefits paid, repaid
and Federal income taxes withheld are shown for the taxable
year. Workers’ compensation amounts are also shown on this
tax statement. SSEB and special guaranty payments are similar
to social security benefits and are treated as social security
benefits for Federal income tax purposes as explained in
Part 2, Taxation of Railroad Retirement Annuities.
Form RRB-1042S is the tax statement which documents the
SSEB portion of tier 1 and special guaranty information
for nonresident aliens. SSEB benefits paid, repaid and U.S.
Federal income taxes withheld are shown for the taxable
year. Workers’ compensation amounts, country of legal
residence and the percentage rate at which U.S. Federal
income tax was withheld are also shown on this tax statement.
SSEB and special guaranty payments are similar to social
security benefits and are treated as social security benefits
for U.S. Federal income tax purposes as explained in Part
2, Taxation of Railroad Retirement Annuities.
Form RRB-1099-R is the tax statement which documents the
NSSEB portion of tier 1, and tier 2 (shown as the contributory
amount paid), the vested dual benefit (VDB), the supplemental
annuity, employee contributions, the percentage rate at
which U.S. Federal income tax was withheld, and the country
of legal residence. The total gross paid (sum of the NSSEB,
tier 2, VDB and supplemental annuity paid amounts) is also
shown on this tax statement. NSSEB, tier 2, VDB and supplemental
annuity benefits paid, repaid and U.S. Federal income taxes
withheld are shown for the taxable year. NSSEB, tier 2,
VDB and supplemental annuity benefits are treated as contributory
or non-contributory pensions for U.S. Federal income tax
purposes as explained in Part 2, Taxation of Railroad Retirement
Annuities.
General:
The totals reported on the tax statements may not
equal the total amount of railroad retirement annuity payments
actually received by the beneficiary during the tax year.
For beneficiaries receiving Medicare, the difference may
be the total amount of Medicare premiums deducted from annuity
payments during the tax year. The difference may be attributable
to other offsets. The total Medicare premiums paid during
the tax year are not shown on any tax statement issued by
the RRB.
For Nonresident
Aliens Only: If your country of legal residence changed
or your rate of tax changed during a given tax year, you
will receive more than one Form RRB-1042S and/or Form RRB-1099-R.
If you were also a resident of the United States during
a given tax year, you may receive Form RRB-1099 and/or Form
RRB-1099-R, and be required to file Form 1040, U.S. Individual
Income Tax Return. For additional information on filing
requirements for nonresident aliens, get IRS
Publication 519, U.S. Tax Guide for Aliens.
Section
7B: Waiver of Debts: IRS Form 1099-C
In addition to the tax statements mentioned above, you
may receive IRS Form 1099-C, Cancellation of Debt, if at
any time during the tax year you were granted a waiver by
the RRB of an overpayment that was $600.00 or more (includes
overpayment principal, interest, penalties and administrative
costs). IRS Form 1099-C is used to report the cancellation
of overpayments of $600.00 or more if they represent amounts
that were not taxable when originally paid. In most cases,
these are overpayments that occurred prior to 1984. The
amount of the canceled debt is taxable in the year the debt
is waived. For more information on IRS Form 1099-C, refer
to the IRS publication entitled, Instructions for Form 1099,
1098, 5498, and W-2G. The RRB releases IRS Form 1099-C by
January 31 of the year following the close of the tax year
in which the overpayment was waived.
Section
7C: Social Security Benefits: Form SSA-1099 and Form SSA-1042S
If you receive social security benefits, you should receive
tax statement Form SSA-1099 (for U.S. citizens) or Form
SSA-1042S (for nonresident aliens) from the SSA. These tax
statements are released in the year following the close
of the tax year. If you have not received these forms or
would like further information on these forms, you should
contact the SSA.
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Part 8 - Additional Information
Questions about U.S. Federal income tax information and/or
how to figure your taxable payments, should be referred
to the local
IRS office listed in your phone book. If you have any
questions what amounts to show on your income tax returns,
contact your own tax preparer or IRS office. However, questions
about railroad retirement annuity payments should be referred
to your local RRB field office.
RRB field offices are open Monday through Friday (except
U.S. Federal holidays), during normal business hours.
You may write us with your inquires at the following address:
U.S. Railroad Retirement Board
844 North Rush Street
Attention: Inquiry & Annual Statements
(IAS) Section - 11th Floor
Chicago, Illinois 60611-2092
Refer to booklet TB-25,
Tax Withholding and Railroad Retirement Payments, for more
detailed information regarding tax withholding on railroad
retirement payments.
Computer Matching and
Privacy Protection Notice
The Computer Matching and Privacy Act of 1988 requires
the RRB to periodically advise you that information you
have provided may be used, without your consent, in automated
matching programs. These matching programs are a computer
comparison of RRB records with records kept by other Federal,
state, or local governmental agencies. Information from
these matching programs can be used to verify a person’s
eligibility for federally funded or administered benefit
programs and for repayment of payments or delinquent debts
under these programs.
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