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Instructions For Form CT-1: Employer's Annual Railroad Retirement Tax Return
Instructions For Form CT-1: Employer's Annual Railroad Retirement Tax Return
Items To Note certain fringe benefits under section 132; and employer payments to a
medical savings account under section 220. For more information on
what benefits are excludable, see Pub. 15-A.
Tax Rates and Compensation Bases ● Payments made to or on behalf of an employee or dependents under
a sickness or accident disability plan or a medical or hospitalization plan
Compensation paid Compensation paid in connection with sickness or accident disability. This applies to Tier II
Tax Rates in 1997 in 1998 and supplemental annuity work-hour taxes only.
Note: For purposes of employee and employer Tier I taxes,
Tier I compensation does not include sickness or accident disability payments
made—
Employer and Employee: 1. Under a worker's compensation law,
Each pay
6.2% of first ........................ $65,400 ....................... $68,400 2. Under section 2(a) of the Railroad Unemployment Insurance Act
for days of sickness due to on-the-job injury,
Tier I Medicare 3. Under the Railroad Retirement Act, or
Employer and Employee: 4. More than 6 months after the calendar month the employee last
Each pay worked.
1.45% of ............................. All ....................... All ● Payments made specifically for traveling or other bona fide and
Tier II necessary expenses that meet the rules in the regulations under section
62.
Employer: Pays ● Payments for service performed by a nonresident alien temporarily
16.1% of first ...................... $48,600 ....................... $50,700 present in the United States as a nonimmigrant under subparagraphs
Employee: Pays (F), (J), (M), or (Q) of the Immigration and Nationality Act.
4.9% of first ........................ $48,600 ....................... $50,700 If compensation earned in any month by an employee in the service
of a local lodge or division of a railway-labor-organization employer is
less than $25, do not count it as taxable compensation.
Supplemental Annuity Work-Hour Tax Rate: The supplemental Successor employers should see section 3231(e)(2)(C) and Circular
annuity work-hour tax rate increased to 35 cents for 1997. E, Employer's Tax Guide (Pub. 15), to see if they can use the
predecessor's compensation paid against the maximums.
Electronic deposit requirement. If your total deposits of income tax Compensation is considered paid when it is actually paid or when it
withheld and social security, Medicare, and railroad retirement taxes is constructively paid. It is considered constructively paid when it is
were more than $50,000 in 1996, you must make electronic deposits for credited to the account of an employee or set apart for the employee
all depository tax liabilities that occur after 1997. See How to make without any limit or condition on how and when the payment is to be
deposits under Depositing Taxes on page 2. made and when it is made available for the employee to draw on at any
time and to control.
Any compensation paid during the current year that was earned in the
General Instructions prior year is taxable at the current year's tax rates, and the compensation
must be included with the current year's compensation on lines 5
Purpose of Form through 14, as appropriate.
Use this form to report taxes imposed by the Railroad Retirement Tax Employer and Employee Taxes
Act (RRTA). Employer taxes. Employers must pay Tier I, Tier II, and supplemental
Who Must File annuity work-hour taxes. Tier I tax is divided into two parts. The amount
of compensation subject to each tax is different. See Items To Note
File Form CT-1 if you paid one or more employees compensation subject above for the tax rates and compensation bases.
to RRTA. For information on the special supplemental annuity tax, see the line
If you are an employer or third-party payer of sick pay that is subject 2 instructions on page 3.
to Tier I railroad retirement and Medicare taxes, you must file Form CT-1. Employee taxes. You must withhold the employee's part of Tier I and
See Pub. 15-A, Employer's Supplemental Tax Guide, for details. Tier II taxes. See Items To Note above for the tax rates and
However, see the exceptions under the definition of compensation compensation bases. See the instructions for line 9 on page 4 for
below. Report sick pay payments on lines 11 through 14. information on the employee tax on tips.
Where and When To File Concurrent Employment
File Form CT-1 with the Internal Revenue Service Center, Kansas City, If two or more related corporations that are rail employers employ the
MO 64999 by March 2, 1998. same individual at the same time and pay that individual through a
Definitions common paymaster, which is one of the corporations, the corporations
are considered a single employer. They have to pay, in total, no more in
Employer and employee. The terms “employer” and “employee” used railroad retirement and Medicare taxes than a single employer would.
in these instructions are defined in section 3231 and in its regulations. See Regulations section 31.3121(s)-1 for more information.
Compensation. Compensation means payment in money, or in Withholding or Payment of Employee Tax by Employer
something that may be used instead of money, for services performed You must collect the employee railroad retirement tax from each
as an employee of one or more employers. It includes payment for time employee by deducting it from the compensation on which employee tax
lost as an employee. is charged. If you do not withhold the employee tax, you must pay the
Compensation does not include: tax. If you withhold too much or too little tax because you cannot
● Any benefit provided to or on behalf of an employee if at the time the determine the correct amount, you should correct the amount withheld
benefit is provided it is reasonable to believe the employee can exclude by an adjustment, credit, or refund according to the regulations relating
such benefit from income, for example, employee achievement awards to the RRTA.
under section 74(c); scholarship and fellowship grants under section 117;
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Line 6. Tier I Employer Medicare Tax Statement. Except for adjustments for fractions of cents, amounts
entered on line 16 must be explained by a statement. Attach a full sheet
Show the amount of compensation (other than tips and sick pay) subject of paper that shows at the top your name, employer identification
to Tier I Medicare tax. Multiply by 1.45% and enter the result. number, calendar year of the return, and “Form CT-1.” Include in the
Line 7. Tier II Employer Tax statement the following information:
1. An explanation of the adjustment that the entry is intended to
Show the amount of compensation (other than tips) subject to Tier II tax. correct showing the amount of compensation subject to Tier I and Tier
Do not show more than $48,600 per employee. Multiply by 16.1% and II taxes and the respective tax rates.
enter the result.
2. The year(s) to which the adjustment relates.
Line 8. Tier I Employee Tax 3. The amount of the adjustment for each year.
Show the amount of compensation, including tips reported, subject to 4. The name and account number of any employee from whom
employee Tier I tax. Do not enter more than $65,400 per employee. employee tax was undercollected or overcollected.
Multiply by 6.2% and enter the result. 5. The manner in which you and the employee have settled any
undercollection or overcollection of employee tax.
Line 9. Tier I Employee Medicare Tax Note: For making adjustments for prior year returns, a timely filed return
Show the amount of compensation, including tips reported, subject to is considered to be filed on the last day of February of the year after the
employee Tier I Medicare tax. Multiply by 1.45% and enter the result. close of the tax year. Generally, the adjustment may be made only within
3 years of that date.
Tips. Cash tips received by an employee in the course of employment
must be reported to you by the employee by the 10th of the month Fractions of cents. If there is a difference between the total employee
following the month the tips are received. No report is required for any tax on lines 8, 9, 10, 13, and 14 and the total actually deducted from your
month in which the tips were less than $20, but otherwise tips should employees' compensation (including tips) plus the employer's
be reported for every month regardless of the total of compensation and contribution due to fractions of cents added or dropped in collecting the
tips for the month. tax, report this difference on line 16 as a deduction or an addition. If this
is the only entry on line 16, do not attach a statement to explain the
An employee must furnish you with a written statement of tips, signed
adjustment to your return.
by the employee, showing (a) his or her name, address, and social
security number, (b) your name and address, (c) the month or period for Line 17. Adjusted Total of Employer and Employee Railroad
which the statement is furnished, and (d) the total amount of tips. Pub. Retirement Taxes Based on Compensation
1244, Employee's Daily Record of Tips and Report to Employer, a
booklet for daily entry of tips and forms to report tips to employers, may Subtract line 16 from line 15 if the net adjustment on line 16 is a
be obtained from the IRS. decrease. Add line 16 to line 15 if the net adjustment on line 16 is an
Tips are considered to be paid at the time the employee reports them increase.
to you. You must collect both income tax and employee railroad
retirement tax on tips reported to you from the employee's compensation Line 19. Total Deposits for the Year
(after deduction of employee railroad retirement and income tax) or from Show the total railroad retirement taxes you deposited using Form 8109,
other funds the employee makes available. Apply the compensation or wire transfer, or EFTPS/RRBLINK. Also include any overpayment
other funds first to the railroad retirement tax and then to income tax. applied from your 1996 return.
You do not have to pay the employer railroad retirement taxes on tips.
Stop collecting the 6.2% Tier I employee tax when the employee's Line 20. Balance Due
wages and tips reach the maximum for the year ($65,400 for 1997). Subtract line 19 from line 18. You should have a balance due only if line
However, your liability for Tier I employer tax on compensation continues 18 is less than $500 unless the balance is a shortfall amount for monthly
until the compensation, not including tips, totals $65,400 for the year. schedule depositors as explained earlier under Accuracy of deposits
If, by the 10th of the month after the month you received an rule.
employee's tip income report, you do not have enough employee funds Enter on your check or money order your employer identification
available to deduct the employee tax, you no longer have to collect it. number, “Form CT-1,” and “1997.” You do not have to pay if line 20 is
less than $1.
Line 10. Tier II Employee Tax
Show the amount of compensation, including tips reported, subject to Line 21. Overpayment
Tier II employee tax. Only the first $48,600 of the employee's If you deposited more than the correct amount of taxes for the year, you
compensation for 1997 is subject to this tax. Multiply by 4.9% and enter check the first box if you want the overpayment applied to your 1998
the result. For tips, see Tips above. Form CT-1. Check the second box if you want it refunded. If line 21 is
Note: Any compensation paid during the current year that was earned less than $1, we will send you a refund or apply it to your next return only
in prior years (reported to the Railroad Retirement Board on Form BA-4, on written request.
Report of Creditable Compensation Adjustments) is taxable at the
current year tax rates. Include such compensation with current year
compensation on lines 5 through 10, as appropriate. Paperwork Reduction Act Notice. We ask for the information on this
form to carry out the Internal Revenue laws of the United States. You
Lines 11 Through 14. Tier I Taxes on Sick Pay are required to give us the information. We need it to ensure that you
Show the sick pay payments during the year subject to Tier I taxes and are complying with these laws and to allow us to figure and collect the
Tier I Medicare taxes. If you are a railroad employer paying your right amount of tax.
employees sick pay, or a third-party payer who did not notify the You are not required to provide the information requested on a form
employer of the payments (thereby subject to the employee and that is subject to the Paperwork Reduction Act unless the form displays
employer tax), make entries on lines 11 through 14. If you are subject a valid OMB control number. Books or records relating to a form or its
to only the employer or employee tax, complete only the applicable line. instructions must be retained as long as their contents may become
Multiply by the appropriate rate and enter the result on the applicable material in the administration of any Internal Revenue law. Generally, tax
line. returns and return information are confidential, as required by section
6103.
Line 16. Adjustments to Taxes Based on Compensation The time needed to complete and file this form will vary depending
Use line 16 to show (a) corrections of underpayments or overpayments on individual circumstances. The estimated average time is:
of taxes reported on prior year returns, (b) credits for overpayments of Recordkeeping—Part I, 10 hr., 17 min.; Part II, 3 hr., 7 min.; Learning
penalty or interest paid on tax for earlier years, and (c) a fractions of about the law or the form—Part I, 2 hr., 23 min.; Part II, 6 min.;
cents adjustment. (See Fractions of cents below.) Do not include the Preparing, copying, assembling, and sending the form to the
1996 overpayment that is applied to this year's return (this is included IRS—Part I, 6 hr., 16 min.; Part II, 9 min.
on line 19). If you are reporting both an addition and a subtraction, enter If you have comments concerning the accuracy of these time
only the difference between the two on line 16. You cannot claim any estimates or suggestions for making this form simpler, we would be
excess credit from line 3 here. Enter the adjustments for sick pay and happy to hear from you. You can write to the Tax Forms Committee,
fractions of cents in the appropriate line 16 entry spaces. Enter the Western Area Distribution Center, Rancho Cordova, CA 95743-0001.
amount of all other adjustments in the “other” entry space, and enter the DO NOT send the tax form to this address. Instead, see Where and
total of the three types of adjustments in the line 16 entry space to the When To File on page 1.
right.
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