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Disregarded entities and qualified subchapter S

1. Certain employee achievement awards under

subsidiaries. Regulations section 301.7701-2(c)(2)(iv)

section 74(c),

treats eligible single-owner disregarded entities and qualified

2. Certain scholarship and fellowship grants under

subchapter S subsidiaries (Q Subs) as separate entities for

section 117,

employment tax purposes. Business owners can no longer

3. Certain fringe benefits under section 132, and

elect to treat the related employment taxes as a liability of

4. Employer payments to an Archer MSA under section

the owner. Instead, report the employment taxes on

220 or health savings accounts (HSA) under section 223.

•

employment tax returns filed by the disregarded entity or Q

Stock transferred to an individual pursuant to the exercise

Sub. For more information, see Disregarded entities and

of an incentive stock option (as defined in section 422(b)) or

qualified subchapter S subsidiaries in the Introduction

under an employee stock purchase plan (as defined in

section of Pub. 15 (Circular E).

section 423(b)); or the disposition of such stock by the

individual.

Where To File

•

Payments made specifically for traveling or other bona

fide and necessary expenses that meet the rules in the

Send Form CT-1 to:

regulations under section 62.

•

Department of the Treasury

Payments for services performed by a nonresident alien

Internal Revenue Service Center

temporarily present in the United States as a nonimmigrant

Cincinnati, OH 45999-0007

under subparagraphs (F), (J), (M), or (Q) of the Immigration

and Nationality Act.

When To File

•

Compensation under $25 earned in any month by an

employee in the service of a local lodge or division of a

File Form CT-1 by February 28, 2011.

railway-labor-organization employer.

•

Payments made to or on behalf of an employee or

Definitions

dependents under a sickness or accident disability plan or a

The terms “employer” and “employee” used in these

medical or hospitalization plan in connection with sickness

instructions are defined in section 3231 and in its

or accident disability. This applies to Tier II taxes only.

regulations.

For purposes of employee and employer Tier I

Compensation

taxes, compensation does not include sickness or

accident disability payments made:

CAUTION

Compensation means payment in money, or in something

that may be used instead of money, for services performed

1. Under a workers’ compensation law,

as an employee of one or more employers. It includes

2. Under section 2(a) of the Railroad Unemployment

payment for time lost as an employee.

Insurance Act for days of sickness due to on-the-job injury,

Group-term life insurance. Include in compensation the

3. Under the Railroad Retirement Act, or

cost of group-term life insurance over $50,000 you provide

4. More than 6 months after the calendar month the

to an employee. This amount is subject to Tier I and Tier II

employee last worked.

taxes, but not to federal income tax withholding. Include this

amount on your employee’s Form W-2, Wage and Tax

Employer and Employee Taxes

Statement.

Former employees for whom you paid the cost of

Tax Rates and Compensation Bases

group-term life insurance over $50,000 must pay the

employee’s share of these taxes with their Form 1040. You

Tax Rates

Compensation Paid in 2010

are not required to collect those taxes. For former

employees, you must include on Form W-2 the part of

Tier I

compensation that consists of the cost of group-term life

insurance over $50,000 and the amount of railroad

Employer and Employee: Each pay 6.2% of first . . . . . . .

$106,800

retirement taxes owed by the former employee for coverage

Tier I Medicare

provided after separation from service. For more

information, see section 2 of Pub. 15-B.

Employer and Employee: Each pay 1.45% of . . . . . . . . .

All

Timing. Compensation is considered paid when it is

Tier II

actually paid or when it is constructively paid. It is

Employer: Pays 12.1% of first . . . . . . . . . . . . . . . . . . .

$79,200

constructively paid when it is set apart for the employee or

credited to an account the employee can control without any

Employee: Pays 3.9% of first . . . . . . . . . . . . . . . . . . .

$79,200

limit or condition on how and when the payment is to be

made.

Employer Taxes

Any compensation paid during the current year that was

Employers must pay both Tier I and Tier II taxes. Tier I tax is

earned in a prior year is taxable at the current year’s tax

divided into two parts. The amount of compensation subject

rates; you must include the compensation with the current

to each tax is different. See the table above for the 2010 tax

year’s compensation on lines 1 through 10 of Form CT-1, as

rates and compensation bases.

appropriate. An exception applies to nonqualified deferred

compensation that was subject to Tier I and Tier II tax in a

Concurrent employment. If two or more related

prior year. See the rules for social security, Medicare, and

corporations that are rail employers employ the same

FUTA taxes in Nonqualified Deferred Compensation Plans

individual at the same time and pay that individual through a

in Pub. 15-A.

common paymaster that is one of the corporations, the

corporations are considered a single employer. They have

Exceptions. Compensation does not include:

•

to pay, in total, no more in railroad retirement taxes than a

Any benefit provided to or on behalf of an employee if at

single employer would. See Regulations section

the time the benefit is provided it is reasonable to believe

31.3121(s)-1 for more information.

the employee can exclude such benefit from income. For

Successor employers. Successor employers should see

information on what benefits are excludable, see Pub. 15-B.

Examples of this type of benefit include:

section 3231(e)(2)(C) and Pub. 15 (Circular E) to see if they

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Instructions for Form CT-1 (2010)

Instructions For Form Ct-1 - Employer'S Annual Railroad Retirement Tax Return - 2010 Page 2

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