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the employee can control without any limit or condition on how

considered a single employer. They have to pay, in total, no

and when the payment is to be made.

more in railroad retirement and Medicare taxes than a single

employer would. See Regulations section 31.3121(s)-1 for more

Any compensation paid during the current year that was

information.

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

Successor employers. Successor employers should see

you must include the compensation with the current year’s

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

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

can use the predecessor’s compensation paid against the

appropriate.

maximum compensation bases.

Exceptions. Compensation does not include:

•

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

Employee Taxes

time the benefit is provided it is reasonable to believe the

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

employee can exclude such benefit from income. For

taxes. See the table above for the tax rates and compensation

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

bases. See Tips below for information on the employee tax on

Examples of this type of benefit include:

tips.

1. Certain employee achievement awards under

Withholding or payment of employee tax by employer. You

section 74(c),

must collect the employee railroad retirement tax from each

2. Certain scholarship and fellowship grants under

employee by deducting it from the compensation on which

section 117,

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

3. Certain fringe benefits under section 132, and

tax, you must still pay the tax. If you withhold too much or too

4. Employer payments to an Archer MSA under section 220.

•

little tax because you cannot determine the correct amount,

Payments made to or on behalf of an employee or

correct the amount withheld by an adjustment, credit, or refund

dependents under a sickness or accident disability plan or a

according to the regulations relating to the RRTA.

medical or hospitalization plan in connection with sickness or

accident disability. This applies to Tier II taxes only.

If you pay the railroad retirement tax for your employee

rather than withholding it, see Rev. Proc. 83-43, 1983-1 C.B.

For purposes of employee and employer Tier I taxes,

778, for information on how to figure and report the proper

compensation does not include sickness or accident

amounts.

disability payments made —

CAUTION

Tips. An employee who receives tips must report them to you

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

1. Under a workers’ compensation law,

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

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

for the month are less than $20.

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

An employee must furnish you with a written statement of

3. Under the Railroad Retirement Act, or

tips, signed by the employee, showing (a) his or her name,

4. More than 6 months after the calendar month the

address, and social security number, (b) your name and

employee last worked.

•

address, (c) the month or period for which the statement is

Payments made specifically for traveling or other bona fide

furnished, and (d) the total amount of tips. Pub. 1244,

and necessary expenses that meet the rules in the regulations

Employee’s Daily Record of Tips and Report to Employer, a

under section 62.

•

booklet for daily entry of tips and forms to report tips to

Payments for service performed by a nonresident alien

employers, is available by calling 1-800-TAX-FORM

temporarily present in the United States as a nonimmigrant

(1-800-829-3676) or on the IRS website at

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

Nationality Act.

Tips are considered to be paid at the time the employee

•

Compensation under $25 earned in any month by an

reports them to you. You must collect both income tax and

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

employee railroad retirement tax on tips reported to you from

railway-labor-organization employer.

the employee’s compensation (after deduction of employee

railroad retirement and income tax) or from other funds the

Employer and Employee Taxes

employee makes available. Apply the compensation or other

funds first to the railroad retirement tax and then to income tax.

Tax Rates and Compensation Bases

You do not have to pay the employer railroad retirement taxes

on tips.

Tax Rates

Compensation Paid in 2003

If, by the 10th of the month after the month you received an

employee’s tip income report, you do not have enough

Tier I

employee funds available to deduct the employee tax, you no

longer have to collect it. See section 6 in Circular E (Pub. 15).

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

$87,000

Tier I Medicare

Depositing Taxes

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

All

For Tier I and Tier II taxes, you are either a monthly schedule

depositor or a semiweekly schedule depositor. Also, see the

Tier II

$2,500 rule and the $100,000 next-day deposit rule on

Employer: Pays 14.2% of first . . . . . . . . . . . . . . . . . . .

$64,500

page 3. The terms “monthly schedule depositor” and

“semiweekly schedule depositor” identify which set of rules you

Employee: Pays 4.9% of first . . . . . . . . . . . . . . . . . . .

$64,500

must follow when a tax liability arises (e.g., when you have a

payday). They do not refer to how often your business pays its

employees or to how often you are required to make deposits.

Employer Taxes

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

Lookback Period

divided into two parts. The amount of compensation subject to

Before each year begins, you must determine the deposit

each tax is different. See the table above for the tax rates and

schedule you must follow for depositing Tier I and Tier II taxes

compensation bases.

for a calendar year. This is determined from the total taxes

Concurrent employment. If two or more related corporations

reported on your Form CT-1 for the calendar year lookback

that are rail employers employ the same individual at the same

period. The lookback period is the second calendar year

time and pay that individual through a common paymaster,

preceding the current calendar year. For example, the lookback

which is one of the corporations, the corporations are

period for calendar year 2004 is calendar year 2002.

-2-

Instructions For Form Ct-1 - Employer'S Annual Railroad Retirement Tax Return - 2003 Page 2

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