Section F - Tax Withholding and Railroad Retirement Annuities
- U.S. Citizen Tax Withholding
- Elected SSEB Tax Withholding
Individuals taxed as U.S. citizens may voluntarily choose to have Federal income tax withheld from the SSEB portion of their tier I benefits. SSEB tax withholding is based on a percentage of the payment. Current percentages are 7%, 10%, 15%, or 25%. Individuals may elect one of these percentages by completing IRS Form W-4V, Voluntary Withholding Request, and sending it to the RRB.
An election remains in force until changed or revoked. An election may be changed or revoked by filing a new IRS Form W-4V at any time.
- Elected Pension (NSSEB, tier II, Vested Dual Benefit, and Supplemental Annuity) Tax Withholding
Individuals taxed as U.S. citizens may voluntarily choose to have Federal income tax withheld from the pension portions of their regular annuities and any supplemental annuities. Individuals may elect pension tax withholding by filing Form RRB W 4P, Withholding Certificate for Railroad Retirement Payments.
Elected pension tax withholding is based on Internal Revenue Service tax tables using the individual's requested marital status and number of withholding allowances. An individual may also request the RRB withhold an additional dollar amount of taxes from annuity payments.
An election remains in force until changed or revoked. An election may be changed or revoked by filing a new Form RRB W-4P at any time.
Note - The following exceptions apply:
- Individuals taxed as U.S. citizens living outside the 50 United States and Washington, D.C. may not elect "NO" tax withholding on Forms RRB W-4P.
- Individuals taxed as U.S. citizens who do not provide U.S. Social Security Numbers (SSNs) on their Forms RRB W-4P may not elect "NO" tax withholding on those forms.
- Mandatory Pension Tax Withholding
If a Form RRB W-4P is not filed, the RRB is required by law to calculate and withhold taxes on the pension portions of an annuity as if the individual were married with three withholding allowances. This is called mandatory citizen tax withholding. Mandatory citizen tax withholding is not applied unless monthly annuity components exceed a minimum mandatory withholding amount. This amount changes each time the IRS tax table rates change.
Refer to booklet TXB-25, Tax Withholding and Railroad Retirement Payments, for the current minimum mandatory withholding amount and more information about tax withholding.
- Change of Address Outside the 50 United States and Guam
Individuals taxed as U.S. citizens who change their addresses outside the 50 United States and Guam, and who have not previously provided the RRB with citizenship information, should submit Form RRB-1001, Nonresident Questionnaire. Form RRB-1001 is used to provide both citizenship and country of bona fide residence information for tax purposes on RRB records. Without this information, the RRB must assume nonresident annuitants are nonresident aliens (NRAs) of the United States, and apply mandatory NRA 30% tax withholding to annuity payments.
- Nonresident Alien (NRA) Tax Withholding
- Mandatory 30% NRA Tax Withholding
As prescribed by the Internal Revenue Code, known non-resident aliens not subject to reduced tax withholding under an income tax treaty and those individuals assumed to be NRAs are subject to mandatory 30% tax withholding rates, applied as follows:
NRAs are identified based on the country of citizenship and country of legal residence they provide on Forms RRB-1001, Nonresident Questionnaire.
- 30% of 85% of the SSEB,
- 30% of the NSSEB, tier II, VDB, and supplemental annuity.
- NRA Tax Withholding Reduced Under Income Tax And Treaties
The United States has a number of income tax treaties with other countries that allow reduced tax withholding if tax treaty exemption claims are filed with the RRB.
Tax treaty exemption claims are secured on Forms RRB-1001, Nonresident Questionnaire. Tax treaty exemption claims are valid until the end of the third year following processing of properly completed Forms RRB-1001.
Individuals claiming reduced tax withholding under an income tax treaty between the United States and their country of bona fide residence for tax purposes must provide a United States Taxpayer Identifying Number (TIN) on Form RRB-1001. An individual's TIN is either a United States Social Security Number (SSN) or a United States Individual Taxpayer Identification Number (ITIN). An estate's or administrator of an estate's TIN is a United States Employer Identification Number (EIN).
Applicants/annuitants living outside the United States who are not eligible to receive a United States SSN, may apply for an ITIN through the United States Internal Revenue Service.
Tax treaty exemption claims must be renewed prior to their expiration dates or mandatory 30% tax withholding rates will apply. The RRB issues tax treaty exemption claim renewal packages containing modified versions of Forms RRB 1001 prior to the expiration dates of the exemption claims.