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Stop, Look & Listen: Railroad Retirement Benefits Q&A

Answers are provided by Robert S. Kaufman

Federal Tax Withholding From Benefits

(Posted September 7, 2002)

Question 191: My husband recently retired from the railroad on disability. He is entitled to a disability annuity of $1,911.18 a month, from which $62.07 is being withheld for Federal income taxes. How do we know if that's enough?

Answer: Use the worksheet that comes with the IRS Form W-4 withholding form to see how much should be withheld each month, so that you can avoid a large underwithholding situation when you file your 2002 Federal tax return next year.

Remember, your husband's disability benefit is not treated uniformly under the Internal Revenue Code. Most of his Tier 1 benefit is taxed like Social Security; the remainer of the Tier 1 benefit and all of the Tier 2 benefit are treated like a private sector contributory pension. Any Supplemental Annuity is treated as a private sector noncontributory pension.

You may wish to consult with a tax accountant to be sure that enough is being withheld by Railroad Retirement. It's probably worth it to do so the first year, because there might be other special tax conditions that apply in your husband's case on account of his disability.

Important notice:

Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.

The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.

Copyright 1997-2017 Robert S. Kaufman
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