Certain portions of a Railroad Retirement annuity are treated differently for federal income tax purposes. The following questions and answers explain these differences and address the importance of individuals establishing accurate tax withholding from their annuities. Certain beneficiaries, including those retiring at age 60 with at least 30 years of service, and some occupational disability annuitants, need to pay close attention to changes in tax withholding when they turn age 62.
1. How are annuities paid under the Railroad Retirement Act treated under federal income tax laws?
A Railroad Retirement annuity is a single payment comprised of one or more of the following components, depending on the annuitant’s age, the type of annuity being paid, and eligibility requirements: a Social Security Equivalent Benefit (SSEB) portion of Tier I, a non-Social Security Equivalent Benefit (NSSEB) portion of Tier I, a Tier II benefit and a supplemental annuity.
In most cases, part of a Railroad Retirement annuity is treated like a Social Security benefit for federal income tax purposes while other parts of the annuity are treated like private pensions for tax purposes. Consequently, most annuitants who are U.S. citizens or residents are sent two tax statements from the Railroad Retirement Board (RRB) each January, even though they receive only a single annuity payment each month. While non–resident aliens also receive a single monthly annuity payment from the RRB, they are only sent one tax statement from the RRB.
2. What information is shown on the Railroad Retirement tax statements sent to annuitants in January?
One tax statement, Form RRB-1099 (only sent to U.S. citizens or residents), shows the SSEB portion of Tier I or special minimum guaranty payments made during the tax year, the amount of any such benefits that an annuitant may have repaid to the RRB during the tax year, and the net amount of these payments after subtracting the repaid amount. The amount of any offset for workers’ compensation and the amount of federal income tax withheld from these payments are also shown.
The other tax statement, Form RRB-1099-R (also only sent to U.S. citizens or residents), shows the NSSEB portion of Tier I, Tier II and supplemental annuity paid to the annuitant during the tax year, and may show an employee contribution amount. The NSSEB portion of Tier I along with Tier II are considered contributory pension amounts and are shown as a single combined amount in the Contributory Amount Paid box (Item 4) on the statement. The supplemental annuity is considered a noncontributory pension amount and is shown as a separate item on the statement.
Non–resident aliens are sent one tax statement, Form RRB-1042S, which shows the information included on both Form RRB-1099 and Form RRB-1099-R.
3. Can annuitants request federal income tax withholding from their benefit payments?
Yes. Annuitants may request that federal income tax be withheld from their annuity payments. To add or change federal income taxes withheld from SSEB payments, an annuitant must complete Internal Revenue Service (IRS) Form W-4V, Voluntary Withholding Request, and send it to the RRB. To add or change the amount of federal taxes withheld from NSSEB payments, annuitants must file Form RRB W-4P, Withholding Certificate for Railroad Retirement Payments, (available at the RRB’s website, RRB.gov) and send it to the RRB. If an annuitant does not file a Form RRB W-4P with the RRB and the taxable annuity components exceed the IRS minimum mandatory withholding amount, taxes will automatically be withheld as if the annuitant were married and claiming three allowances. Railroad Retirement benefits are not taxable by any state, so state tax withholding from Railroad Retirement payments is not possible. Annuitants that wish to add or change federal tax withholding from their annuity payments may contact an RRB field office for assistance. While the RRB may provide the necessary forms for withholding, it is the annuitant’s responsibility to determine how much federal income tax withholding is needed. Annuitants are encouraged to discuss the amount of withholding needed with a tax adviser or the IRS.
4. Which Railroad Retirement benefits are treated like Social Security benefits for federal income tax purposes?
The SSEB portion of Tier I – the part of a Railroad Retirement annuity equivalent to a Social Security benefit based on comparable earnings and included on Form RRB-1099 (or Form RRB-1042S for nonresident aliens) – must be reported on an individual’s federal income tax return, and is treated for tax purposes the same way as a Social Security benefit. The amount of these benefits that may be subject to federal income tax, if any, depends on the beneficiary’s income. (To determine if any amount of the SSEB portion is taxable, please refer to IRS publication 915, Social Security and Equivalent Railroad Retirement Benefits.) If part of the SSEB is taxable, how much is taxable depends on the total amount of a beneficiary’s benefits and other income. Usually, the higher that total amount, the greater the taxable part of a beneficiary’s benefit.
5. Which Railroad Retirement benefits are treated like private pensions for federal income tax purposes?
The NSSEB portion of Tier I, Tier II benefits, and supplemental annuities – which are included on Form RRB-1099-R (or Form RRB-1042S for nonresident aliens) – are all treated like private pensions for federal income tax purposes. In some cases, primarily those in which early retirement benefits are payable to retired employees and spouses between ages 60 and 62, some occupational disability benefits, and other categories of unique RRB entitlements, the entire annuity may be treated like a private pension. This is because Social Security benefits based on age and service are not payable before age 62, Social Security disability benefit entitlement requires total disability, and the Social Security Administration does not pay some categories of beneficiaries paid by the RRB.
6. How are 60/30 annuity payments taxed?
A railroad employee with 30 or more years of creditable rail service is eligible for a regular annuity based on age and service the first full month he or she is age 60. The employee’s spouse is also eligible for an annuity the first full month he or she is age 60. These “60/30” annuity payments are taxed as follows:
60/30 annuity payments before the employee or spouse is age 62:All benefits paid to an employee before age 62 are considered NSSEB and are fully taxable and reported on Form RRB-1099-R (or Form RRB-1042S for nonresident aliens). This includes all Tier I and Tier II benefits and any supplemental annuity that might be payable. Spouse benefits are also fully taxable and reported on Form RRB-1099-R (or Form RRB-1042S for nonresident aliens) until both the employee and spouse are age 62.
60/30 annuity payments after the employee is age 62: Once the employee turns age 62, part of the Tier I benefit is still considered NSSEB, but some is now considered SSEB because equivalent Social Security benefits are payable at age 62. Since these equivalent Social Security benefits paid at age 62 would be reduced for early retirement, while 60/30 benefits are not reduced, the RRB computes the portion of the Tier I benefit comparable to that payable under Social Security, and reports the SSEB amount on Form RRB-1099 (or Form RRB-1042S for nonresident aliens). The SSEB portion of spouse benefits is calculated the same way, except the employee and spouse must both be at least 62 for spouse benefits to be considered SSEB.
WARNING for 60/30 annuitants who begin receiving annuities before age 62:As noted previously, when the employee turns age 62 (or the spouse turns age 62, provided the employee is also at least age 62) the taxability of Tier I benefits changes from all private pension-equivalent benefits to a split between SSEB and NSSEB portions. For many annuitants, this means that the tax withholding in place will automatically decrease, and sometimes this change is significant. This is because any Form RRB W-4P on file with the RRB will not consider the SSEB portion of Tier I in the withholding calculation. In many cases, the SSEB portion will be subject to taxation because of the total amount of the annuitant’s income, and the decrease in withholding may result in an insufficient amount of taxes being withheld. Notices are released to annuitants advising of the change in the withholding amount, and they are encouraged to discuss the issue with a tax adviser or the IRS to determine the correct amount of withholding for them. Annuitants often need to file a new tax withholding election form with the RRB to increase withholding following this change, otherwise they may face a larger tax liability than expected when filing federal income tax returns the following year.
7. Are occupational disability annuitants subject to the same change in tax withholding at age 62?
Those occupational disability annuitants not qualified for a period of disability (also known as a “Disability Freeze”) as defined under the Social Security Act will similarly see the taxability of Tier I benefits change at age 62.
8. Where can an annuitant find more information about the taxability of Railroad Retirement annuities?
The Centers for Medicare & Medicaid Services (CMS) has announced that the standard monthly Part B premium will be $170.10 in 2022, an increase of $21.60 from $148.50 in 2021. Some Medicare beneficiaries may pay less than this amount because, by law, Part B premiums for current enrollees cannot increase by more than the amount of the cost-of-living adjustment for Social Security (Railroad Retirement Tier I) benefits.
Since the cost-of-living adjustment is 5.9% in 2022, some Medicare beneficiaries may see an increase in their Part B premiums but still pay less than $170.10. The standard premium amount will also apply to new enrollees in the program. However, certain beneficiaries will continue to pay higher premiums based on their modified adjusted gross income.
The monthly Part B premiums that include income-related adjustments for 2022 will range from $238.10 to $578.30, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $91,000 (or $182,000 for a married couple). The highest rate applies to beneficiaries whose incomes exceed $500,000 (or $750,000 for a married couple). CMS estimates that about 7% of Medicare beneficiaries pay the income-adjusted premiums.
Beneficiaries in Medicare Part D prescription drug coverage plans pay premiums that vary from plan to plan. Part D beneficiaries whose modified adjusted gross income exceeds the same income thresholds that apply to Part B premiums also pay a monthly adjustment amount. In 2022, the adjustment amount ranges from $12.40 to $77.90.
The Railroad Retirement Board withholds Part B premiums, Part B income-related adjustments and Part D income-related adjustments from benefit payments it processes. The agency can also withhold Part C and D premiums from benefit payments if an individual submits a request to his or her Part C or D insurance plan.
The following tables show the income-related Part B premium adjustments for 2022. The Social Security Administration (SSA) is responsible for all income-related monthly adjustment amount determinations. To make the determinations, SSA uses the most recent tax return information available from the Internal Revenue Service. For 2022, that will usually be the beneficiary’s 2020 tax return information. If that information is not available, SSA will use information from the 2019 tax return.
Railroad Retirement and Social Security Medicare beneficiaries affected by the 2022 Part B and D income-related premiums will receive a notice from SSA by the end of the year. The notice will include an explanation of the circumstances when a beneficiary may request a new determination. Persons who have questions or would like to request a new determination should contact SSA after receiving their notice.
Additional information about Medicare coverage, including specific benefits and deductibles, can be found at www.medicare.gov.
2022 Part B Premiums
Beneficiaries who file an individual tax return with income:
Beneficiaries who file a joint tax return with income:
Income-related monthly adjustment amount
Total monthly Part B premium amount
Less than or equal to $91,000
Less than or equal to $182,000
Greater than $91,000 and less than or equal to $114,000
Greater than $182,000 and less than or equal to $228,000
Greater than $114,000 and less than or equal to $142,000
Greater than $228,000 and less than or equal to $284,000
Greater than $142,000 and less than or equal to $170,000
Greater than $284,000 and less than or equal to $340,000
Greater than $170,000 and less than $500,000
Greater than $340,000 and less than $750,000
$500,000 and above
$750,000 and above
The monthly premium rates paid by beneficiaries who are married, but file a separate return from their spouses and who lived with their spouses at some time during the taxable year, are different. Those rates are as follows:
Beneficiaries who are married, but file a separate tax return, with income:
Railroad Retirement benefit recipients who have a qualifying child and didn’t file a 2018 or 2019 tax return have a limited window to register to have $500 per eligible child added automatically to their soon-to-be-received $1,200 COVID-19 payment, the Internal Revenue Service said Monday.
A quick trip to a special non-filer tool on IRS.gov by noon Eastern time, Wednesday, April 22, may help put all of their eligible Economic Income Payment into a single payment, the agency said in a news release.
“We want to ‘Plus $500’ these recipients with children so they can get their maximum Economic Impact Payment of $1,200 plus $500 for each eligible child as quickly as possible,” said IRS Commissioner Chuck Rettig. “They’ll get $1,200 automatically, but they need to act quickly and register at IRS.gov to get the extra $500 per child added to their payment. These groups don’t normally have a return filing obligation and may not realize they qualify for a larger payment. We’re asking people and organizations throughout the country to share this information widely and help the IRS with the Plus $500 Push.”
If the Wednesday deadline is missed, RRB beneficiaries who don’t normally file a tax return and do not register with the IRS by April 22, will still be eligible to receive the separate payment of $500 per qualifying child. Their payment at this time will be $1,200 and, by law, the additional $500 per eligible child amount would be paid in association with a return filing for tax year 2020. They will not be eligible to use the Non-Filer tool to add eligible children once their $1,200 payment has been issued, the IRS said.
Certain Union Pacific (UP) workers who were employed by the carrier from 1991 to 2017 might get some money back in their pockets thanks to a ruling made in the United States Court of Appeals for the Eighth Circuit.
If they meet certain criteria and were taxed on particular stock options or ratification bonuses, current and former UP workers will receive a refund after the appeals court sided with UP in the summer of 2017 and reversed a district court’s ruling in a fight over taxes with the Internal Revenue Service (IRS).
At the heart of the matter was whether stock options or ratification bonuses received by UP workers should have been treated as taxable income under the Railroad Retirement Tax Act. The IRS argued successfully in district court that this was the case and received a summary judgment of about $75 million in taxes owed by the carrier. However, UP appealed the decision, and the appeals court reversed the district court’s ruling.
In June 2018, the U.S. Supreme Court denied a petition by the IRS to hear the case, settling the matter in favor of UP and paving the way for the potential payouts.
In order to determine their eligibility for a refund, people who were employed by UP from 1991 to 2017 must file a consent form by visiting www.unionpacifictaxrefund.com. The consent form must be turned in by a March 12, 2019, deadline in order to receive a refund, which is scheduled to be disbursed between June and August 2019.
All UTU locals are now required to make federal tax payments on-line using the Electronic Federal Tax Payment System (EFTPS).
This is because the Internal Revenue Service announced that effective Jan. 1, 2011, it no longer will accept Form 8109 FTD (federal tax deposit) coupons for filing federal tax payments.
The EFTPS is a free service from the Treasury Department. It is available by phone or online 24/7.
UTU treasurers should start using EFTPS beginning with December 2010 payroll tax liability payments due in January 2011. An exemption will be for employers who have $2,500 or less in quarterly payroll tax liability for 941 returns and pay this liability when filing the return.
Note that federal tax payments due Jan. 15, 2011, for the December payroll tax liability will not be accepted if you try to pay with a paper coupon. Any December 2010 federal payroll tax payment due on any date of January 2011 must be submitted electronically, either by phone or online. Therefore, you must be set up for electronic filing before Dec. 31.
If you are already making deposits using EFTPS, you need to do nothing.
Failure to remit your payroll tax payment electronically after Jan. 1, 2011 may result in a 10 percent penalty charge on the deposit amount for each non-electronic payment.
A letter with more information is being mailed to treasurers.
UTU locals that have not filed Form 990, Form 990EZ or Form 990-N with the Internal Revenue Service for the last three years have until Oct. 15, 2010, to file, or they will automatically lose their tax-exempt status.
Any name under which the organization operates or does business;
The organization’s mailing address and its Internet Web site address (if any);
The organization’s taxpayer identification number;
The name and address of a principal officer; and,
Evidence of the continuing basis for the organization’s exemption from the filing requirements under section 6033(a)(1).
Form 990-N has just been made available by the IRS. Like Form 990, the 990-N will be due no later than the 15th day of the fifth month after the end of an organization’s tax year.
Although there is no monetary penalty for failing to file the e-postcard, organizations that do not file for three years in a row will have their tax-exempt status revoked. To be reinstated, an organization will have to file a new exemption application and pay the applicable user fee.
Congress imposed this new requirement because of concerns that small organizations, that have had no annual filing requirement in the past, have not kept the IRS up-to-date on address and other changes.