Thank you for answering me. I am still confused. I am trying to do my son's taxes. He works for the railroad. He is 35 and does not receive a pension. On his W-2 from the railroad, he has $1675 in contributions for 2008. His W-2 lists RRTA Tier I wages, RRTA Medicare wages, and RRTA II wages which all reflect the same amount. The RRTA Tier I tax withheld lists an amount, the RRTA Medicare tax withheld lists a different amount and RRTA Tier II tax withheld lists yet another amount. Even after your answer, I still do not know where to list the tax withheld amounts on Form 1040. He did not receive either form you listed above.
Railroad employers are subject to a separate and distinct system of employment taxes from the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA) systems covering most other employers. Parts of the system are the responsibility of the IRS, and parts of the system are the responsibility of the Railroad Retirement Board, an independent governmental agency.
Because this is a separate system for railroad employers, payments subject to railroad retirement taxes are specifically excepted from FICA, FUTA, and the Self-Employment Contributions Act (SECA).
When looking at the rates for RRTA, and comparing them to the rates used for social security, it is readily apparent that a railroad employer is subject to a much higher rate of tax than a non-railroad employer.
Tier I tax is the equivalent of FICA and Medicare, and is computed in the same manner, using the same annual wage base and tax rates. It is assessed equally on the employer and employee.Tier II tax uses a separate annual wage base and tax rate from those applicable for Tier I. In addition, the tax is not assessed equally on the employer and employee. Instead, the employer pays a significantly greater share of this tax.
Railroad employers use Form W-2 to report wage payments to employees and to SSA. RRTA taxes are shown in Box 14, and Boxes 3, 4, 5, 6 and 7, relating to FICA and Medicare, should be blank.
Forgive me for hounding you and I appreciate your answers, however, I still do not understand if I need to list the Tier I or Tier II taxes that were withheld on his W-2 on Form 1040 and if so, where?
Railroad employers must file Form W-2 to report their employees' wages and income tax withholding in boxes 1 and 2 - these will report taxable wages and federal tax withheld.
Taxable wages are reported on the line 7 of the form 1040 - http://www.irs.gov/pub/irs-pdf/f1040.pdf.
Tax withheld should be reported on the line 62.
For employees covered by RRTA tax, you also must report the Tier I and Tier II taxes withheld in box 14 of Form W-2. Label them "Tier I tax" and "Tier II tax." Boxes 3, 4, 5, 6, and 7 apply only to covered social security and Medicare employees and are not to be used to report railroad retirement wages and taxes.
Generally - you do not need to worry about reporting these taxes.