Instructions For Form Ct-1 (2009) - Internal Revenue Service (Page 2 of 7) in pdf

For purposes of employee and employer Tier I

Compensation

taxes, compensation does not include sickness or

Compensation means payment in money, or in something

accident disability payments made:

CAUTION

that may be used instead of money, for services performed

as an employee of one or more employers. It includes

1. Under a workers’ compensation law,

payment for time lost as an employee.

2. Under section 2(a) of the Railroad Unemployment

Group-term life insurance. Include in compensation the

Insurance Act for days of sickness due to on-the-job injury,

cost of group-term life insurance over $50,000 you provide

3. Under the Railroad Retirement Act, or

to an employee. This amount is subject to Tier I and Tier II

4. More than 6 months after the calendar month the

taxes, but not to federal income tax withholding. Include this

employee last worked.

amount on your employee’s Form W-2, Wage and Tax

Statement.

Employer and Employee Taxes

Former employees for whom you paid the cost of

Tax Rates and Compensation Bases

group-term life insurance over $50,000 must pay the

employee’s share of these taxes with their Form 1040. You

are not required to collect those taxes. For former

Tax Rates

Compensation Paid in 2009

employees, you must include on Form W-2 the part of

compensation that consists of the cost of group-term life

Tier I

insurance over $50,000 and the amount of railroad

Employer and Employee: Each pay 6.2% of first . . . . . . .

$106,800

retirement taxes owed by the former employee for coverage

provided after separation from service. For more

Tier I Medicare

information, see section 2 of Pub. 15-B.

Employer and Employee: Each pay 1.45% of . . . . . . . . .

All

Timing. Compensation is considered paid when it is

Tier II

actually paid or when it is constructively paid. It is

Employer: Pays 12.1% of first . . . . . . . . . . . . . . . . . . .

$79,200

constructively paid when it is set apart for the employee or

credited to an account the employee can control without any

Employee: Pays 3.9% of first . . . . . . . . . . . . . . . . . . .

$79,200

limit or condition on how and when the payment is to be

made.

Employer Taxes

Any compensation paid during the current year that was

Employers must pay both Tier I and Tier II taxes. Tier I tax is

earned in a prior year is taxable at the current year’s tax

divided into two parts. The amount of compensation subject

rates; you must include the compensation with the current

to each tax is different. See the table above for the 2009 tax

year’s compensation on lines 1 through 10 of Form CT-1, as

rates and compensation bases.

appropriate. An exception applies to nonqualified deferred

compensation that was subject to Tier I and Tier II tax in a

Concurrent employment. If two or more related

prior year. See the rules for social security, Medicare, and

corporations that are rail employers employ the same

FUTA taxes in Nonqualified Deferred Compensation Plans

individual at the same time and pay that individual through a

in Pub. 15-A.

common paymaster, which is one of the corporations, the

corporations are considered a single employer. They have

Exceptions. Compensation does not include:

•

to pay, in total, no more in railroad retirement taxes than a

Any benefit provided to or on behalf of an employee if at

single employer would. See Regulations section

the time the benefit is provided it is reasonable to believe

31.3121(s)-1 for more information.

the employee can exclude such benefit from income. For

information on what benefits are excludable, see Pub. 15-B.

Successor employers. Successor employers should see

Examples of this type of benefit include:

section 3231(e)(2)(C) and Pub. 15 (Circular E) to see if they

can use the predecessor’s compensation paid against the

1. Certain employee achievement awards under

maximum compensation bases.

section 74(c),

2. Certain scholarship and fellowship grants under

Employee Taxes

section 117,

You must withhold the employee’s part of Tier I and Tier II

3. Certain fringe benefits under section 132, and

taxes. See the table above for the tax rates and

4. Employer payments to an Archer MSA under section

compensation bases. See Tips below for information on the

220 or health savings accounts (HSA) under section 223.

•

employee tax on tips.

Stock transferred to an individual pursuant to the exercise

of an incentive stock option (as defined in section 422(b)) or

Withholding or payment of employee tax by employer.

under an employee stock purchase plan (as defined in

You must collect the employee railroad retirement tax from

section 423(b)); or the disposition of such stock by the

each employee by deducting it from the compensation on

individual.

which employee tax is charged. If you do not withhold the

•

Payments made specifically for traveling or other bona

employee tax, you must still pay the tax. If you withhold too

fide and necessary expenses that meet the rules in the

much or too little tax because you cannot determine the

regulations under section 62.

correct amount, correct the amount withheld by an

•

Payments for services performed by a nonresident alien

adjustment, credit, or refund according to the applicable

temporarily present in the United States as a nonimmigrant

regulations.

under subparagraphs (F), (J), (M), or (Q) of the Immigration

If you pay the railroad retirement tax for your employee

and Nationality Act.

•

rather than withholding it, see Rev. Proc. 83-43,

Compensation under $25 earned in any month by an

1983-1 C.B. 778, for information on how to figure and report

employee in the service of a local lodge or division of a

the proper amounts.

railway-labor-organization employer.

•

Payments made to or on behalf of an employee or

Tips. An employee who receives tips must report them to

dependents under a sickness or accident disability plan or a

you by the 10th of the month following the month the tips are

medical or hospitalization plan in connection with sickness

received. Tips must be reported for every month, unless the

or accident disability. This applies to Tier II taxes only.

tips for the month are less than $20.

-2-

Instructions for Form CT-1 (2009)

Instructions For Form Ct-1 (2009) - Internal Revenue Service Page 2

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