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

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

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

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

3. Under the Railroad Retirement Act, or

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

4. More than 6 months after the calendar month the

for the month are less than $20.

employee last worked.

An employee must furnish you with a written statement of

•

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

Payments made specifically for traveling or other bona fide

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

and necessary expenses that meet the rules in the regulations

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

under section 62.

•

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

Payments for service performed by a nonresident alien

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

temporarily present in the United States as a nonimmigrant

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

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

employers, may be obtained from the IRS.

Nationality Act.

•

Compensation under $25 earned in any month by an

Tips are considered to be paid at the time the employee

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

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

employee railroad retirement tax on tips reported to you from

railway-labor-organization employer.

the employee’s compensation (after deduction of employee

Employer and Employee Taxes

railroad retirement and income tax) or from other funds the

employee makes available. Apply the compensation or other

Tax Rates and Compensation Bases

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

You do not have to pay the employer railroad retirement taxes

on tips.

Tax Rates

Compensation Paid in 2001

Stop collecting the 6.2% Tier I employee tax when the

employee’s wages and tips reach the maximum for the year

Tier I

($80,400 for 2001). However, your liability for Tier I employer

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

$80,400

tax on compensation continues until the compensation, not

including tips, totals $80,400 for the year.

Tier I Medicare

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

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

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

All

employee funds available to deduct the employee tax, you no

longer have to collect it.

Tier II

Depositing Taxes

Employer: Pays 16.1% of first . . . . . . . . . . . . . . . . . . .

$59,700

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

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

$59,700

depositor or a semiweekly schedule depositor. There are also

two special rules explained on page 3 — the $2,500 rule and

Supplemental annuity work-hour tax rate. The supplemental

the $100,000 next-day deposit rule. The terms “monthly

annuity work-hour tax rate is 26 cents for 2001.

schedule depositor” and “semiweekly schedule depositor” do

Employer taxes. Employers must pay Tier I, Tier II, and

not refer to how often your business pays its employees, or how

supplemental annuity work-hour taxes. Tier I tax is divided into

often you are required to make deposits. The terms identify

two parts. The amount of compensation subject to each tax is

which set of rules you must follow when a tax liability arises

(when you have a payday).

different. See the table above for the tax rates and

compensation bases.

Before each year begins, you must determine which deposit

For information on the special supplemental annuity tax, see

schedule to follow. Your deposit schedule for the year is

determined from the total Form CT-1 taxes reported for the

the line 2 instructions on page 5.

lookback period.

Concurrent employment. If two or more related

Lookback period. Which deposit schedule you must follow for

corporations that are rail employers employ the same individual

at the same time and pay that individual through a common

depositing Tier I and Tier II taxes for a calendar year is

determined from the total taxes reported on your Form CT-1 for

paymaster, which is one of the corporations, the corporations

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

a calendar year lookback period. The lookback period is the

more in railroad retirement and Medicare taxes than a single

second calendar year preceding the current calendar year. For

example, the lookback period for calendar year 2002 is

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

information.

calendar year 2000.

Successor employers. Successor employers should see

Use the table below to determine which deposit schedule to

section 3231(e)(2)(C) and Circular E, Employer’s Tax Guide

follow for the current year.

(Pub. 15), to see if they can use the predecessor’s

compensation paid against the maximum compensation bases.

IF you reported taxes

THEN you are a...

for the lookback period of...

Employee taxes. You must withhold the employee’s part of

Tier I and Tier II taxes. See the table above for the tax rates

and compensation bases. See Tips below for information on

$50,000 or less

Monthly schedule depositor

the employee tax on tips.

More than $50,000

Semiweekly schedule depositor

Withholding or payment of employee tax by employer.

You must collect the employee railroad retirement tax from

each employee by deducting it from the compensation on which

New employer. If you are a new employer, your taxes for

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

the lookback period are considered to be zero for the first

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

calendar year of your business. Therefore, you are a monthly

tax because you cannot determine the correct amount, correct

schedule depositor for the first year of business.

the amount withheld by an adjustment, credit, or refund

Example. Employer A reported Form CT-1 taxes as follows:

•

according to the regulations relating to the RRTA.

2000 Form CT-1 — $49,000

•

If you pay the railroad retirement tax for your employee

2001 Form CT-1 — $52,000

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

Employer A is a monthly schedule depositor for 2002

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

because its Form CT-1 taxes for its lookback period (calendar

amounts.

year 2000) were not more than $50,000. However, for 2003,

-2-

Instructions For Form Ct-1 - Employer'S Annual Railroad Retirement Tax Return - 2001 Page 3

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