There are two categories of benefits paid under the Railroad Retirement Act: the Social Security Equivalent Benefit and Non-Social Security Equivalent Benefit. Each category has its own treatment for income tax purposes:
Social Security Equivalent Benefit (SSEB)
The SSEB is the portion of the Tier 1 railroad retirement benefit that equals the amount a railroad employee or beneficiary would have been entitled to receive under the social security system. It is treated like social security benefits for tax purposes.
Non-Social Security Equivalent Benefit (NSSEB)
The NSSEB consists of:
- the remainder of the Tier 1 railroad retirement benefit
- any Tier 2 benefit
- vested dual benefit (VDB)
- supplemental annuity benefit
The NSSEB is treated as an amount received from a qualified employee plan. While VDBs and supplemental annuity benefits are “non-contributory pensions” and thus are fully taxable, employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits can be recovered tax-free.
To report Railroad Retirement Benefits in the Keystone Tax Solutions Pro, from the Main Menu of the tax return (Form 1040) select:
- Income Menu
- IRA/Pension Distributions (1099R,RRB-1099-R)
- New
- Choose either Taxpayer or Spouse, as needed
- At the top right of the Form 1099R entry window, click the check box next to RRB-1099-R
The entry window will now look like this:
Enter all data from Form RRB-1099-R or for nonresident returns Form RRB-1042-S
If there is amount in Box 4, the Taxpayer may be eligible to compute a tax-free Simplified General Rule Worksheet. If so, click the check box next to the SGR. You will be asked Would you like to use the Simplified General Rule Worksheet? Answer YES and input the data needed on the worksheet.
Editing the Form RRB-1099-R Entry in the tax program:
From the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- IRA/Pension Distributions (1099R,RRB-1099-R)
- Select the entry and select Edit, or double-click the entry you wish to Edit.
- Adjust the information as needed.
Deleting a Form RRB-1099-R Entry in the tax program:
From the Main Menu of the Tax Return (Form 1040) select:
- Income Menu
- IRA/Pension Distributions (1099R,RRB-1099-R)
- Select the entry and select the Delete button.
- You will be asked to confirm. Select YES.
Sample Form RRB-1099-R
Sample Form RRB-1042S
NOTE: This is a guide to entering Railroad Retirement Benefits into the Keystone Tax Solutions Pro program. This is not intended as tax advice. For additional information refer to Additional Information below.
Additional information:
Form RRB-1099 Tax Statement General Information and Explanation of Items
Form RRB-1099-R Tax Statement General Information and Explanation of Items
Form RRB-1042S Tax Statement General Information and Explanation of Items
Publication 575, Pension and Annuity Income
Publication 915, Social Security and Equivalent Railroad Retirement Benefits