Instructions For Form Ct-1 - 2016 (Page 3 of 8) in pdf

For purposes of Tier 2 taxes, compensation doesn't

Rev. Proc. 83-43,1983-1 C.B. 778, for information on how to

include payments made to or on behalf of an employee or

figure and report the proper amounts.

dependents under a sickness or accident disability plan or a

Tips. Your employee must report cash tips to you by the

medical or hospitalization plan in connection with sickness or

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

accident disability.

received. The report should include charged tips you paid

Employer and Employee Taxes

over to the employee for charge customers, tips the

employee received directly from customers, and tips

received from other employees under any tip-sharing

Tax Rates and Compensation Bases

arrangement. Both directly and indirectly tipped employees

must report tips to you. Cash tips must be reported for every

Tax Rates

Compensation

month, unless the cash tips for the month are less than $20.

Paid in 2016

Stop collecting the Tier 1 Employee tax when his or her

Tier 1

compensation and tips for tax year 2016 reach $118,500.

Employer and Employee: Each pay 6.2% of

Collect the Tier 1 Employee Medicare tax for the whole year

first

$118,500

on all compensation and tips. Collect the Tier 1 Employee

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional Medicare Tax withholding on compensation and

Tier 1 Medicare

tips that exceed $200,000 for the calendar year.

Employer and Employee: Each pay 1.45% of

All

. .

An employee must furnish you with a written (or electronic)

Tier 1 Employee Additional Medicare Tax

statement of cash tips, signed by the employee, showing (a)

withholding

his or her name, address, and social security number; (b)

Employee: Pays 0.9% on compensation

your name and address; (c) the month or period for which the

exceeding

$200,000

. . . . . . . . . . . . . . . . . . . . . .

statement is furnished; and (d) the total amount of cash tips.

Tier 2

Pub. 1244, Employee's Daily Record of Tips and Report to

Employer, a booklet for daily entry of tips and forms to report

Employer: Pays 13.1% of first

$88,200

. . . . . . . . . . . .

tips to employers, is available at

Employee: Pays 4.9% of first

$88,200

. . . . . . . . . . . .

Tips are considered to be paid at the time the employee

reports them to you. You must collect both employee railroad

retirement tax and federal income tax on cash tips reported

Employer Taxes

to you from the employee's compensation (after withholding

Employers must pay both Tier 1 and Tier 2 taxes, except for

employee railroad retirement and federal income tax related

Tier 1 Employee Additional Medicare Tax. Tier 1 tax is

to the nontip compensation) or from other funds the

divided into two parts. The amount of compensation subject

employee makes available. Apply the compensation or other

to each tax is different. See the table above for the 2016 tax

funds first to the railroad retirement tax and then to federal

rates and compensation bases.

income tax. You don't have to pay employer railroad

retirement taxes on tips.

Concurrent employment. If two or more related

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

corporations that are rail employers employ the same

an employee's tip income report, you don't have enough

individual at the same time and pay that individual through a

employee funds available to withhold the employee tax, you

common paymaster that is one of the corporations, the

may report the excess amount without withholding the

corporations are considered a single employer. They have to

related tax. Include the tips your employees report to you on

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

lines 4, 5, 6, and 7, even if you were unable to withhold the

single employer would. See Regulations section

employee's share of tax. Then report the uncollected Tier 1

31.3121(s)-1 for more information.

Employee tax, Tier 1 Employee Medicare tax, Tier 1

Successor employers. Successor employers should see

Employee Additional Medicare Tax withholding, and Tier 2

section 3231(e)(2)(C) and Pub. 15 to see if they can use the

Employee tax on tips on line 14. See section 6 in Pub. 15.

predecessor's compensation paid against the maximum

Depositing Taxes

compensation bases.

For Tier 1 and Tier 2 taxes, you’re either a monthly schedule

Employee Taxes

depositor or a semiweekly schedule depositor. However, see

You must withhold the employee's part of Tier 1 and Tier 2

the $2,500 Rule and the $100,000 Next-Day Deposit Rule

taxes. See the table under Employer and Employee Taxes,

under Exceptions to the Deposit Rules, later. The terms

earlier, for the tax rates and compensation bases. See Tips

“monthly schedule depositor” and “semiweekly schedule

below for information on the employee tax on tips.

depositor” identify which set of rules you must follow when a

tax liability arises (for example, when you have a payday).

Withholding or payment of employee tax by employer.

They don't refer to how often your business pays its

You must collect the employee railroad retirement tax from

employees or to how often you’re required to make deposits.

each employee by withholding it from employee

compensation. If you don't withhold the employee tax, you

If you were a monthly schedule depositor for the entire

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

year, complete the Monthly Summary of Railroad Retirement

because you can't determine the correct amount, correct the

Tax Liability in Part II of Form CT-1. If you were a semiweekly

amount withheld by an adjustment, credit, or refund

schedule depositor during any part of the year or you

according to the applicable regulations.

accumulated $100,000 or more on any day during a deposit

If you pay the railroad retirement tax for your employee

period, you must complete Form 945-A, Annual Record of

rather than withholding it, the amount of the employee's

Federal Tax Liability.

compensation is increased by the amount of that tax. See

-3-

Instructions for Form CT-1 (2016)

Instructions For Form Ct-1 - 2016 Page 3

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