Railroad SS

[bekzm]

Ok - have a client that she is saying that the railroad social security according to the rr board is not suppose to be taxed at the 85%. To me she is confusing the rr pension and the ss social security. What am I missing? The rr social security is taxed like regular social security - no special treatments are there for rr social security. Getting a headache from all the mass confusion this time of year.

[oceanlovin'ea]

No special treatment

It is just their social security because they didn't pay into ss system while they were working.
She is probably confused.

Linda F

[Jesse]

There is Tier 1 and Tier 2 rr retirement. I think Tier 1 is Social Security equivalent and Tier 2 is partly contributed funds. Maybe someone more knowledgable can jump in as I know I have a client that will be coming next week so I need to learn more about this as well.

Does the rr retirement portion that is the non taxable contributory portion need to be calculated by some formula or will this amount be calculated by the issuer and reported with a breakdown of taxable and nontaxable on the RRB 1099?

If we need to calculate what information is needed for the calculation?

[Zee]

Ok - have a client that she is saying that the railroad social security according to the rr board is not suppose to be taxed at the 85%. To me she is confusing the rr pension and the ss social security. What am I missing? The rr social security is taxed like regular social security - no special treatments are there for rr social security. Getting a headache from all the mass confusion this time of year.

It'd be a good idea to read Pub 715. Here's what it says. My guess is she's confused.

"Nonresident aliens. A nonresident alien is an individual who is not a citizen or resident of the United States. If you are a nonresident alien, the rules discussed in this publication do not apply to you. Instead, 85% of your benefits are taxed at a 30% rate, unless exempt (or subject to a lower rate) by treaty. You will receive a Form SSA-1042S or Form RRB-1042S showing the amount of your benefits. These forms will also show the tax rate and the amount of tax withheld from your benefits".

http://www.irs.gov/publications/p915/ar02.html#d0e257

[Larmil]

There is Tier 1 and Tier 2 rr retirement. I think Tier 1 is Social Security equivalent and Tier 2 is partly contributed funds. Maybe someone more knowledgable can jump in as I know I have a client that will be coming next week so I need to learn more about this as well.

Does the rr retirement portion that is the non taxable contributory portion need to be calculated by some formula or will this amount be calculated by the issuer and reported with a breakdown of taxable and nontaxable on the RRB 1099?

If we need to calculate what information is needed for the calculation?

Tier 1 is taxed like social security. Tier 2 is taxed like a pension. This applies to the federal only. No state can tax any payments made by the Railroad Retirement Board including unemployment benefits.

See http://www.rrb.gov/forms/PandS/tax/tl1099.asp for more info.

Larmil in Kansas City.