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
- the vested dual benefit (VDB)
- the 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 enter railroad retirement benefits reported on Form RRB-1099-R in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- IRA/Pension Distributions (1099R,RRB-1099-R) - Select New, and for a return filing MFJ select either Taxpayer or Spouse.
- At the top right of the Form 1099-R entry window, click the check box next to "RRB-1099-R". The window will change to a layout suitable to Form RRB-1099-R.
- Enter all data from the form.
If there is amount in Box 4, the taxpayer may be eligible to use the simplified method to calculate the taxable portion of the distribution. 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.
Note: This is a guide to entering railroad retirement benefits into the TaxSlayer Pro program. This is not intended as tax advice.