How to Recoup Your Excess Railroad Retirement Tax Withheld

Transcript:

Did you overpay your railroad retirement taxes? You need to watch this video.

Welcome everyone to another edition of the Highball Advisors Railroad Retirement Whiteboard. My name's John McNamara, Highball Advisors and today we're going to talk about overpaying your taxes.

So I feel like this one is mostly for those railroaders that might switch to another railroad mid-year, that type of thing. Maybe a higher earning railroader, this might affect them. So let's just talk about this and then you can decide hey, this affects me, it doesn't affect me, that type of thing. But if you know somebody, share it because it's important. It's really important.

So as we know in this year of 2023 when we're recording the video, tier one gets taxed at 6.2%, up to $160,000 of your income. So you can pay up to 6.2% of 160,000. In tier two, you could pay 4.9% up to $118,800. If you did that and you just worked at one railroad, you won't pay over that. However, let's say you did six months with one railroad and you're a high earner and you've paid in, and then all of a sudden you switch to another railroad. They're just going to keep taxing you at the same rate and what's going to happen is you're going to pay more over the $160,000 to 6.2%, and likewise, the same thing with tier two.

So that's an overpayment. You've paid too much into it. So we got to find a way to get that money back. So here's the way you want to approach that. So for excess tier one taxation, you want to claim a credit on your income tax. So what you have to do is go to schedule three, part two, line 11, and there's a line in there that says excess amount for the railroad retirement tax. Just a tier one portion, it'll say social security or railroad retirement tier one. So that's got to be completed. So if you're doing TurboTax, make sure you have that or notify your CPA, let them know that.

Now the second part's a little trickier and I don't know. It's just tougher to get the transparency on it, so to speak. So you got to request a refund using Form 843 by the IRS, and that's for overpayment. What you do is you fill out this Form 843. The amounts that you requesting, and then you got to attach the relevant W2s for the tax year and that will show the overpayment. Then what you want to do is send it by cert.... This is the good way to communicate with the IRS here for actually any tax issue. So not just Form 843. Is send it by certified mail. One, they got to sign off and that way they know you got it. But you can also put a cover letter in there. Say, dear IRS, I'm attaching Form 843 blah, blah, blah for overpayment. Then put in a return envelope and then in that cover letter you say, please acknowledge that you receive it.

What they'll do is they'll stamp that letter received, the IRS service representative, put back in the self-addressed envelope and mail it back to you. So that's two points there on the certified mail and the letter coming back. So that's a great way when you communicate with the IRS, because you hear in the news a lot of shorthanded employment, I guess in the IRS. So they're short staffed and this way at least, you know it got there and it's not on some floor somewhere or something like that.

All right, well that's it. Hope you've found this helpful for those who've overpaid their railroad retirement taxes. If you don't, save this. You never know when you might move a railroad or something and this issue might come up for some of you. Or if you know some newbies that have just come on board, send this to them to help them out also.

Please click on the subscribe button to subscribe to my channel. I appreciate that. Click on the notification bell to get the latest videos. And until next time, everyone, please stay safe, stay on track and take care. So long, everybody. Bye.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.