Form 6559, Transmitter Report and Summary of Magnetic Media

Form W-3 and Form 6559 are Internal Revenue Service (IRS) forms which are filed with the Social Security Administration (SSA). The IRS receives copies of this information from the SSA for federal tax data purposes. Payors must file either Form W-3 or Form 6559 annually, depending upon whether they submit paper or magnetic media reports of Forms W-2, Wage and Tax Statement.

Form W-3, Transmittal of Income and Tax Statements, is a cover form to send copy A of payees' paper Forms W-2 to the SSA. Instructions for completion are issued with the forms by the IRS.

Form 6559, Transmitter Report and Summary of Magnetic Media, is a cover form to send magnetic tape reports of Forms W-2 to the SSA. Instructions for completion are on the back of the form. Instructions for filing magnetic media W-2 reports are issued by SSA in its publication "Magnetic Media Reporting" (TIB-4).

If you submit Form W-2 data on magnetic media, do not submit the same W-2 data to SSA on paper forms.

Proper Completion Prevents Duplicate Earnings

Form W-3/6559 is important to the correct crediting of railroad payees' earnings records. Failure to complete Form W-3 or 6559 correctly may result in the inadvertent posting of duplicate earnings. Duplicate earnings are annual earnings that are erroneously posted as social security wages on an individual's wage record at SSA from the W-2 data and correctly posted as Tier 1 sick pay on the same individual's record at the Railroad Retirement Board (RRB) from Form BA-10 , Report of Miscellaneous Compensation and Sick Pay. Duplicate earnings overstate the person's lifetime earning record. The erroneous earnings record create the potential for overpayments when a railroad retirement or social security benefit is paid to that individual.

The key concept in preventing duplicate earnings is to correctly identify the sickness payments as covered under railroad retirement, not social security, for the accompanying W-2 data. It is important that third party sick payors of payments covered under Railroad Retirement Act notate the correct box in the "Kind of Payor" block of the Form W-3. "CT-1" is the only box which should be marked. For magnetic media reports, railroad employees should be reported with an "X" in the type of employment field of the code E record.

Whether reporting by paper or magnetic media, railroad employees should not have railroad retirement tax reported as social security tax, nor their sick pay reported as social security wages. Dollar amounts reported on Forms W-2 should balance with those on the Form W-3, so the blocks on Forms W-2 for these items also should not have an entry when the sick pay is creditable under railroad retirement.

Avoid a Common Error

A common error for railroad retirement reporters is to enter Medicare tax amounts in the Medicare tax withheld blocks on Forms W-2 and W-3. This is an understandable error since Medicare taxes have been paid. However, this should not be done because when Medicare taxes are shown, SSA's computer system looks for corresponding social security taxes, creating a discrepancy which must be resolved.

How are railroad retirement Tier I and Medicare taxes correctly shown on the Form W-2? It is not mandatory to report railroad retirement tax withholding or Medicare information on a railroad employee's Form W-2. If you want to detail these amounts on Forms W-2 as a service to your employees, use the "other" box.

Separate Railroad Retirement and Social Security Business

If you also have payees covered under the Social Security Act, separate cover forms should be filed for the non-railroad payees. This also applies to completion of Forms W-2.

Employees covered under the SSA should be reported following a Code E record containing either an "A", "Q" or "R" (see the specification booklet to determine which is appropriate) in the type of employment field.

If you learn that your railroad earnings report has been processed as social security wages, contact your local SSA office for advice.