I am a railroad employee and made payments for the year to railroad retirement and need to know how to claim it. Tier 1 and Tier 2 tax is how it shows up on my w2

[DianeW · Accepted solution]

This is not a tax that is deductible.  Rather Tier 1 it is the social security and medicare tax equivalent and the Tier 2 taxes imposed on railroad employees, employers, and employee representatives are a source of funding for benefits under the Railroad Retirement Act.

Enter the W2 exactly as it appears and TurboTax will calculate the correct taxable wages.  

[timmyuser]

I understand tier 1 and tier 2, my question would be I've worked for the railroad for the entire year but I my put the numbers in and TurboTax says my employer overpaid, and I have to contact them is this possible? not only do I have the tier-1 and tier-2 but I also have the federal withholding In box number 2 is that normal could it be the problem?

I went out and check the percentages for the withholdings and they seem correct but TurboTax keeps saying I overpaid and I have to contact my employer

[LindaB1993]

Please review the W-2 entries in box 3-7 .  These boxes should be blank. A common error is to enter Medicare tax withheld in the Medicare tax block - an understandable error since Medicare taxes have been paid.   Box 2 is correct for the federal taxes withheld.  

A "Railroad W2" is a standard IRS Form W-2 issued to an employee covered by the Railroad Retirement Act (RRTA). You will see the following differences from the usual W-2:

• Boxes 3 through 7 are blank.
• Instead, box 14 Other,  reports “RRTA compensation,” “Tier I tax,” “Tier II tax,” “Medicare tax,” and “Additional Medicare Tax.”

[timmyuser]

that is all still correct, TurboTax is still telling me contact my employer. none of the boxes 3-7 have anything in them.

[ThomasM125]

It appears that that Tier one and/or Tier two tax withheld was more than it should have been, so you are due a refund from your employer. The Tier one percentage should have been 6.2% of your wages and Tier two should have been 4.9%.

If your employer withheld the wrong amount, you will have to get it refunded from them. This will not affect your income tax filing.

[timmyuser]

thank you for the quick response, however I just checked the percentages and they are correct, 

my W-2 

box 1 wage

box 2 10% of wage

box 14 

       tier 1    6.2%

       tier 1    1.4%

       tier 2     4.9%

however TurboTax continues tell me that they have overpaid by a couple thousand

[PinkLady]

RAILROADERS:

Just spent an hour and a half on tax support:

If you have excess Tier 1 tax paid because of more than one railroad job, we had to do the following to resolve TurboTax problems with properly calculating excess Tier 1 Tax and applying the credit to the 1040 form:

For both W-2s, Make sure you enter RRT1, RRT2 and MED in the same order in box 14 on TurboTax.  E.g. in TurboTax Box 14, make line one for RRT1, Line 2 RRT2 and Line 3 MED , THEN add any other box 14 items in TurboTax for all your employer W-2s.

After you get all your box 14 items from each W-2 into the proper order on TurboTax:

ADD A LINE UNDER THOSE and write "RAILROAD COMPENSATION". 

In the $ amount box put your W-2 BOX 1 WAGES

From the dropdown menu select Railroad compensation . 

TurboTax will then correctly add up how much Tier 1 tax is due, then tell you what you properly overpaid, and then put a schedule 3 in your tax forms and give you the proper $ credit to this year's taxes.  You would still have to file an IRS form 843 for excess Tier 2 tax if you paid that.  

We never had to do this in TurboTax before.  I don't know if it is a glitch or a feature, but it is not well done on TurboTax's part.

Hope this helps.  It worked for us.

[PinkLady]

@timmyuser, if you had only one RR job, you may just need to add the "Railroad Compensation" in the box 14 line item, then put your W-2 box 1 wages in the $ amount on box 14 and select Railroad Compensation in the dropdown box.  Hope that fixes it for you.

[davencarly]

First, I'd like to thank you for your help as I was having the same exact issue in TurboTax.

The trick of adding Railroad Compensation with the $ amount from box 1 worked. However, it still tells me I overpaid by a lesser amount now.

Interestingly, though, I pay into a 457 plan, which is tax deferred. When I add my 457 contributions from box 12a to my box 1 wages amount and then multiply that total by 6.2% it does equal what was withheld for my RRT1. I don't know if you had the same scenario or not. But, this has me wondering if my RRT1 withholding was done correctly after all, and did TurboTax just mess it up?

Does anyone know if the RRT1 and RRT2 withholdings are supposed to be based on 6.2% and 4.9% of box 1 earnings only, or are they supposed to be based on the sum of box 1 and any qualified tax deferred retirement plan contributions?

I know that 457 contributions are deferred from Federal income tax, but I'm not sure about RRT1 and RRT2.

[cdobyn]

yes turbo tax has been giving me the exact same problem.

[PinkLady]

Yes, put your gross wages - wages plus any 401k, etc. - in box 12a and “railroad compensation.”