If it appears you may be entitled to a railroad tax refund, please read this part of the booklet thoroughly. It will help you understand what a railroad tax refund is and when one can be paid.

Definition of a Railroad Tax Refund

If the railroad taxes the RRB receives are greater than the amount which will affect the annuity amount, the employee can receive a refund of the additional railroad taxes. Generally, the additional railroad taxes will be paid when the employee begins receiving a railroad retirement benefit. If the employee dies before receiving a refund, the additional railroad taxes are payable to the employee’s survivors. An application for a railroad tax refund must be filed by the second anniversary of the employee’s death. The two types of railroad tax refunds, excess and separation allowance, are described in the following sections.

Excess Tax Refund

If the employee had railroad employment and employment covered by the Social Security Act in the same year, both railroad retirement and social security taxes may have been deducted from the employee’s earnings. Excess taxes that were deducted from the employee’s earnings in the years between 1950 and 1974 can be refunded by the RRB. Excess taxes that were deducted for years after 1974 must be refunded by the Internal Revenue Service.

Separation Allowance Tax Refund

If the employee received a separation allowance or severance payment after 1984, it is possible the payment will not produce additional service credits. If additional service is not credited, the Tier 2 payroll taxes that were withheld from the payment, may be refunded.

People Eligible To Receive a Railroad Tax Refund

The railroad tax refund is paid to an employee’s survivors according to the following priorities:

1. The widow(er) of the employee who was living with the employee at the time of the employee’s death. If there is no qualified widow(er), the unpaid railroad tax refund can be paid to:
2. the employee’s children. If no children survive the employee, the unpaid railroad tax refund can be paid to:
3. the employee’s grandchildren. If no grandchildren survive the employee, the unpaid railroad tax refund can be paid to:
4. the employee’s parents. If no parents survive the employee, the unpaid railroad tax refund can be paid to:
5. the employee’s brothers and sisters. If no brothers and sisters survive the employee, the unpaid railroad tax refund can be paid to:
6. the employee’s estate.

If there is more than one person in the category of people to whom the unpaid railroad tax refund is being paid, the unpaid railroad tax refund will be split equally among all the qualified people in that category.