Specific Instructions

Final Return

If you stop paying taxable compensation and will not have to file Form CT-1 in the future, you must file a final return and check the Final return box at the top of Form CT-1 under “2014.” This final return should furnish information showing the last date on which you paid compensation you reported on Form CT-1.

The final return should be accompanied by a statement providing the address at which the records for your Forms CT-1 will be kept and the name of the person keeping the records. If the business has been transferred to another person, the statement should include the name and address of the transferee and the date of the transfer. If the business was not transferred or the transferee is not known, the statement should so state. The statement should be furnished in duplicate.

Processing of your return may be delayed if you do not provide the required amounts in the Compensation and Tax columns.

Line 1—Tier 1 Employer Tax

Enter the compensation (other than tips and sick pay) subject to Tier 1 Employer tax in the Compensation column. Multiply by 6.2% and enter the result in the Tax column. The total amount listed in the Compensation column for lines 1 and 8 combined may not be more than $117,000 per employee.

Line 2—Tier 1 Employer Medicare Tax

Enter the compensation (other than tips and sick pay) subject to Tier 1 Employer Medicare tax in the Compensation column. Multiply by 1.45% and enter the result in the Tax column.

Line 3—Tier 2 Employer Tax

Enter the compensation (other than tips) subject to Tier 2 Employer tax in the Compensation column. Do not enter more than $87,000 per employee. Multiply by 12.6% and enter the result in the Tax column.

Line 4—Tier 1 Employee Tax

Enter the compensation, including tips reported (but excluding sick pay), subject to Tier 1 Employee tax in the Compensation column. Multiply by 6.2% and enter the result in the Tax column. The total amount listed in the Compensation column for lines 4 and 10 combined may not be more than $117,000 per employee.

Stop collecting the 6.2% Tier 1 Employee tax when the employee's compensation (including sick pay) and tips reach the maximum for the year ($117,000 for 2014). However, your liability for Tier 1 Employer tax on compensation continues until the compensation (including sick pay), but not including tips, totals $117,000 for the year.

Line 5—Tier 1 Employee Medicare Tax

Enter the compensation, including tips reported (but excluding sick pay), subject to Tier 1 Employee Medicare tax in the Compensation column. Multiply by 1.45% and enter the result in the Tax column. For information on reporting tips, see Tips, earlier.

Line 6—Tier 1 Employee Additional Medicare Tax Withholding

Enter the compensation, including tips reported (but excluding sick pay) that is subject to Tier 1 Employee Additional Medicare Tax withholding. You are required to begin withholding Tier 1 Employee Additional Medicare Tax in the pay period in which you pay compensation in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Tier 1 Employee Additional Medicare Tax is only imposed on the employee. There is no employer share of Tier 1 Additional Medicare Tax. All compensation (including sick pay) that is subject to Tier 1 Medicare tax is subject to Tier 1 Employee Additional Medicare Tax if paid in excess of the $200,000 withholding threshold.

Visit IRS.gov and enter “Additional Medicare Tax” in the search box for more information on Tier 1 Employee Additional Medicare Tax.

Line 7—Tier 2 Employee Tax

Enter the compensation, including tips reported, subject to  
Tier 2 Employee tax in the Compensation column. Only the first $87,000 of the employee's compensation (including tips) for 2014 is subject to this tax. Multiply by 4.4% and enter the result in the Tax column. For information on reporting tips, see Tips, earlier.

Any compensation paid during the current year that was earned in prior years (reported to the Railroad Retirement Board on Form BA-4, Report of Creditable Compensation Adjustments) is taxable at the current year tax rates, unless special timing rules for nonqualified deferred compensation apply. See Publication 15-A. Include such compensation with current year compensation on lines 1–7, as appropriate.

Lines 8–12—Tier 1 Taxes on Sick Pay

Enter any sick pay payments during the year that are subject to Tier 1 taxes, Tier 1 Medicare taxes, and Tier 1 Employee Additional Medicare Tax withholding in the Compensation column. Multiply by the rate for the line and enter the result in the Tax column for that line. For Tier 1 Employer taxes, the total amount listed in the Compensation column for lines 1 and 8 combined may not be more than $117,000 per employee. For Tier 1 Employee taxes, the total amount listed in the Compensation column for lines 4 and 10 combined may not be more than $117,000 per employee. Tier 1 Medicare taxes are not subject to a dollar limitation.

All compensation (including sick pay) that is subject to Tier 1 Medicare tax is subject to Tier 1 Employee Additional Medicare Tax if paid in excess of the $200,000 withholding threshold.

If you are a railroad employer paying your employees sick pay, or a third-party payer who did not notify the employer of the payments (thereby subject to the employee and employer tax), make entries on lines 8–12. If you are subject to only the employer or employee tax, complete only the applicable lines. Multiply by the appropriate rates and enter the results in the Tax column.

Line 13—Total Tax Based on Compensation

Add lines 1 through 12 and enter the result on line 13.

Line 14—Adjustments to Taxes Based on Compensation

Do not use line 14 for prior period adjustments. Make all prior period adjustments on Form CT-1 X.

Enter on line 14:

  • A fractions of cents adjustment (see Adjustment for fractions of cents, later);

  • Credits for overpayments of penalty or interest paid on tax for earlier years; and

  • Any uncollected Tier 1 Employee tax, Tier 1 Employee Medicare tax, Tier 1 Employee Additional Medicare Tax, and Tier 2 Employee tax on tips.

Enter the total of these adjustments in the Tax column. If you are reporting both an addition and a subtraction, enter only the difference between the two on line 14. If the net adjustment is negative, report the amount on line 14 using a minus sign, if possible. If your computer software does not allow the use of minus signs, you may use parentheses.

Do not include on line 14 any 2013 overpayment that is applied to this year's return (this is included on line 16).

Required statement.   Except for adjustments for fractions of cents, explain amounts entered on line 14 in a separate statement. Include your name, employer identification number (EIN), calendar year of the return, and “Form CT-1” on each page you attach. Include in the statement the following information.
  • An explanation of the item the adjustment is intended to correct showing the compensation subject to Tier 1 and 
    Tier 2 taxes and their respective tax rates.

  • The amount of the adjustment.

  • The name and account number of any employee from whom employee tax was undercollected or overcollected.

  • How you and the employee have settled any undercollection or overcollection of employee tax.

Adjustment for fractions of cents.   If there is a difference between the total employee tax (lines 4–7 and 10–12) and the total actually withheld (employee compensation including tips plus the employer's contribution) due to rounding fractions of cents when collecting the tax, report the deduction or addition on line 14.

  
If this is the only entry on line 14, you are not required to attach a statement explaining the adjustment.

Line 15—Total Railroad Retirement Taxes Based on Compensation

Combine the amounts shown on lines 13 and 14 and enter the result on line 15.

Line 16—Total Deposits for the Year

Enter the total Form CT-1 deposits for the year, including any overpayment that you applied from filing Form CT-1 X and any overpayment that you applied from your 2013 return.

Line 17—Balance Due

If line 15 is more than line 16, enter the difference on line 17. Otherwise, see Overpayment below. You do not have to pay if line 17 is under $1. Generally, you should show a balance due on line 17 only if your total railroad retirement taxes based on compensation for the year (line 15) is less than $2,500. However, see Accuracy of Deposits Rule, earlier, regarding payments made under the accuracy of deposits rule.

If you were required to make federal tax deposits, pay the amount shown on line 17 by EFT. If you were not required to make federal tax deposits, you may pay the amount shown on line 17 by EFT, check, or money order. For more information on electronic payment options, visit the IRS website at www.irs.gov/e-pay.

If you pay by EFT, file your return using the address under Where To File, earlier. Do not file Form CT-1(V), Payment Voucher. If you pay by check or money order, make it payable to “United States Treasury.” Enter your EIN, Form CT-1, and the tax period on your check or money order. Complete Form CT-1(V) and enclose with Form CT-1.

Line 18—Overpayment

If line 16 is more than line 15, enter the difference on line 18. Never make an entry on both lines 18 and 17. If line 18 is less than $1, we will send you a refund or apply it to your next return only if you ask us in writing to do so.

If you deposited more than the correct amount for the year, you can have the overpayment refunded or applied to your next return by checking the appropriate box on line 18. Check only one box on line 18. If you do not check either box or if you check both boxes, generally we will apply the overpayment to your account. We may apply your overpayment to any past due tax account that is shown in our records under your EIN.

Part II. Record of Railroad Retirement Tax Liability

This is a summary of your yearly tax liability, not a summary of deposits made. If line 15 is less than $2,500, do not complete Part II or Form 945-A.

If you are a monthly schedule depositor, enter your tax liability for each month and figure the total liability for the year. If you do not enter your tax liability for each month, the IRS will not know when you should have made deposits and may assess an “averaged” failure-to-deposit penalty. See section 11 of Pub. 15 (Circular E). If your tax liability for any month is negative (for example, if you are adjusting an overreported liability in a prior month), do not enter a negative amount for the month. Instead, enter zero for the month and subtract that negative amount from your tax liability for the next month.

Note.

The amount shown on line V must equal the amount shown on line 15.

If you are a semiweekly schedule depositor or if you accumulate $100,000 or more in tax liability on any day in a deposit period, you must complete Form 945-A and file it with Form CT-1. Do not complete lines I–V if you file Form 945-A.

Third-Party Designee

If you want to allow an employee of your business, a return preparer, or another third party to discuss your 2014 Form CT-1 with the IRS, check the “Yes” box in the “Third-Party Designee” section. Also, enter the designee's name, phone number, and any five digits that person chooses as his or her personal identification number (PIN).

By checking the “Yes” box, you are authorizing the IRS to speak with the designee to answer any questions relating to the processing of or the information reported on Form CT-1. You are also authorizing the designee to do all of the following.

  • Give the IRS any information that is missing from your return.

  • Call the IRS for information about processing your return.

  • Respond to certain IRS notices that you have shared with the designee about math errors and return preparation. The IRS will not send notices to your designee.

You are not authorizing the designee to receive any refund check, bind you to anything (including additional tax liability), or otherwise represent you before the IRS. If you want to expand the designee's authority, see Pub. 947, Practice Before the IRS and Power of Attorney.

The authorization will automatically expire 1 year from the due date (without regard to extensions) for filing your 2014 Form CT-1. If you or your designee wants to revoke this authorization, send the revocation or withdrawal to the IRS office at which you file your Form CT-1. See Pub. 947 for more information.

Who Must Sign

The following persons are authorized to sign the return for each type of business entity.

  • Sole proprietorship—The individual who owns the business.

  • Corporation (including a limited liability company (LLC) treated as a corporation)—The president, vice president, or other principal officer duly authorized to sign.

  • Partnership (including an LLC treated as a partnership) or unincorporated organization—A responsible and duly authorized partner, member, or officer having knowledge of its affairs.

  • Single member LLC treated as a disregarded entity for federal income tax purposes—The owner of the LLC or a principal officer duly authorized to sign.

  • Trust or estate—The fiduciary.

Form CT-1 also may be signed by a duly authorized agent of the taxpayer if a valid power of attorney has been filed.

Alternative signature method.   Corporate officers or duly authorized agents may sign Form CT-1 by rubber stamp, mechanical device, or computer software program. For details and required documentation, see Rev. Proc. 2005-39, 2005-28 I.R.B. 82, at www.irs.gov/irb/2005-28_IRB/ar16.html.

Paid Preparer Use Only

A paid preparer must sign Form CT-1 and provide the information in the Paid Preparer Use Only section of Part I if the preparer was paid to prepare Form CT-1 and is not an employee of the filing entity. The preparer must give you a copy of the return in addition to the copy to be filed with the IRS.

If you are a paid preparer, write your preparer tax identification number (PTIN) in the space provided. Include your complete address. If you work for a firm, write the firm's name and the EIN of the firm. You can apply for a PTIN at www.irs.gov/ptin, or by filing Form W-12, IRS Paid Preparer Tax Identification Number (PTIN) Application and Renewal. You cannot use your PTIN in place of the EIN of the tax preparation firm.

Generally, you are not required to complete this section if you are filing the return as a reporting agent and have a valid Form 8655, Reporting Agent Authorization, on file with the IRS. However, a reporting agent must complete this section if the reporting agent offered legal advice, for example, by advising the client on determining whether its workers are employees or independent contractors for federal tax purposes.


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