General Information
Refer to booklet TB-25,
"Tax Withholding and Railroad Retirement Payments", for
more detailed information regarding tax withholding on railroad retirement
payments. Refer to booklet TB-85, "Information about the Taxation of Railroad
Retirement Annuities", for general taxation information.
We only report taxable payments and repayments on the tax statements.
Questions about U.S. income tax information, what amounts to show on income tax
returns, or how to figure your taxable payments should be referred to the
Internal Revenue Service. However, questions about railroad retirement benefit
payments should be referred to your local Railroad Retirement Board
office.
Tier I And Tier II
The Tier I component of a railroad retirement annuity is composed of two
parts:
- The Social Security Equivalent Benefit (SSEB) portion, and
- The Non-Social Security Equivalent Benefit (NSSEB) portion. Your Tier I may
be composed of SSEB only, NSSEB only, or both.
The SSEB portion of Tier I is similar to a social security benefit and is
treated as a social security benefit for Federal income tax purposes.
To determine if your SSEB portion of Tier I and/or social security benefits are
taxable, refer to the Social Security Benefits worksheet in the
IRS booklet 1040
Instructions. For more detailed information, get
IRS Publication 915,
"Social
Security Benefits and Equivalent Railroad Retirement Benefits".
The NSSEB portion of Tier I and the Tier II portion of a railroad retirement
annuity are treated like contributory pensions for Federal income tax purposes.
Only the amount of the contributory pension that exceeds the amount of
contributions made by the wage earner is taxable. Refer to
IRS Publication 939,
"General Rule for Pensions and Annuities", to determine your taxable amount if you
are not using the Simplified General Rule.
Information For Widow(er)s
For widow(er)s that were paid as a spouse for part of the year,
only the annuity
payments received as a widow(er) should be used to compute the nontaxable
portion of the annuity payments.
For a widow(er) under age 60 who has a child in care, the Tier I portion of the
railroad retirement annuity is considered all SSEB. However, the Tier I portion
of the railroad retirement annuity is considered all NSSEB if the Tier I is
not
payable under the rules established by the Social Security Administration. An
example of Tier I considered as all NSSEB occurs when the child under the
widow(er)'s care turns age 16 and is not disabled.
Repayments
A repayment is a returned payment, a cash refund, or an amount withheld for
overpayment purposes.
Under the Internal Revenue Code, the RRB is allowed to give repayment credit for
the SSEB and/or pre-SSEB portion of Tier I for any tax year. Refer to
IRS
Publication 915, "Social Security and Equivalent Railroad Retirement Benefits",
for information regarding current tax year or prior tax year's SSEB repayment.
The NSSEB portion of Tier I and Tier II repayments are composed of taxable and
nontaxable portions. There are tax implications when considering NSSEB Tier II
repayments. Therefore, the way you will handle the repayment will depend on the
tax years to which the repayment applies, and whether you had included the
benefits that you repaid in your gross income for those tax years. Refer to
IRS
Publication 575, "Pension and Annuity Income", for information regarding NSSEB,
Tier II , Vested Dual Benefits, and SUPP repayments as well as instructions on
how to handle current tax year and prior tax years' repayments for income tax
purposes.
U.S. Citizen and Resident Tax Withholding
The RRB allows citizens and legal residents of the United States to elect tax
withholding on their railroad retirement annuity. A tax withholding election
must be filed on Form RRB W-4P,
"Withholding Certificate For Railroad Retirement
Payments".
RRB annuitants can also file "IRS Form W-4V, Voluntary Withholding Request", to
have taxes withheld from the SSEB portion of Tier I, or from their Social
Security Benefits. "Form W-4V" permits tax withholding at four set rates: 7%, 10%,
15% or 27%. "Form RRB W-4P" allows annuitants to have taxes deducted from the
pension portions of the annuity: NSSEB, Tier II, Vested Dual Benefits, and SUPP.
If you elect to have income taxes withheld, by using Form RRB W-4P, you may
control the amount of taxes withheld from your regular monthly or accrued
annuity payments by specifying your marital status and the number of withholding
allowances. You may also request the RRB to withhold an additional amount or not
to withhold any taxes from your annuity by using Form
"RRB W-4P". If an election
is made, it will remain in force until changed or revoked. If an election is not
made, the RRB is required by law to withhold taxes as if you were married with
three allowances. However, tax withholding would not automatically be initiated
unless your taxable annuity components paid in a month exceed the minimum
mandatory withholding amount. Refer to booklet TB-25,
"Tax Withholding and
Railroad Retirement Payments", for the minimum mandatory withholding amount and
further information on tax withholding.
NOTE: If a U.S. citizen moves or resides outside of the United States and has
not filed Form RRB-1001, "Nonresident Questionnaire", claiming U.S. citizenship,
taxes will be withheld at the mandatory nonresident alien tax withholding rate
until Form RRB-1001 is received at the RRB. See the following section for
further information.
Nonresident Alien Tax Withholding
A nonresident alien is an individual who is
neither a citizen nor a resident of
the United States. As prescribed by the Internal Revenue Code, nonresident
aliens are subject to a mandatory tax withholding rate of 30% on 85% of the SSEB
amount and 30% of the NSSEB and Tier II amounts.
The United States has a number of tax treaties with foreign countries which may
result in reduced tax withholding or, in some instances, no tax withholding for
citizens or residents of those foreign countries. In order to take advantage of
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. Such a claim must
be renewed every three years. Form RRB-1001, "Nonresident Questionnaire", is what
a nonresident beneficiary should file in order to furnish citizenship,
residence, and tax treaty claim exemption information to the RRB. If
Form
RRB-1001 is not filed or received, any nonresident beneficiary is assumed to be
a nonresident alien and the mandatory tax withholding rate prescribed by the
Internal Revenue Code is applied to the railroad retirement annuity.
Therefore, we encourage our beneficiaries to file proof of citizenship and/or a
Form RRB-1001
before moving to a foreign country in order to avoid the mandatory
nonresident alien tax withholding rate.
Contact an office of the RRB, an American Consulate, or an American Embassy if
you need help completing Form RRB-1001, if you need to submit proof of your
legal residence or citizenship.
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