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If you employ railroad workers, you’re subject to the Railroad Retirement Tax Act (RRTA): a federal tax system that replaces traditional Social Security for rail and certain transit workers. RRTA is parallel to, not in addition to, standard payroll taxes. The rules are distinct: different rates, different wage bases, different reporting forms, and different pension implications.
Who Is Subject to RRTA?
Employees are covered by RRTA if they work for a railroad employer (defined by the Railroad Retirement Board) or if they perform services in connection with moving railroad cars or operating on-track equipment. Most employees of Class I and Class II railroads are covered. Some exemptions exist for certain transit workers and short-line railroads.
RRTA Tax Structure: Tier I and Tier II
RRTA has two tiers. Tier I is a federal payroll tax similar to Social Security (6.2% employee + 6.2% employer on wages up to an annual wage base). Tier II is a supplemental pension tax (0.9% to 5.85% employee, 3.5% to 11.15% employer, depending on the railroad). The combined rate can exceed 15% for both employee and employer contributions. That’s significantly higher than the standard 7.65% FICA rate.
RUIA: Railroad Unemployment Insurance
In addition to RRTA, most railroads must pay the Railroad Unemployment Insurance Account (RUIA) tax (typically 0.65% to 2.75% employee, 4% to 11.1% employer). It funds unemployment benefits specifically for railroad workers, which are typically higher and longer-lasting than state UI. That’s by design, not accident.
Reporting and Compliance
Railroad employers file Form RRB-6401 (quarterly) and Form RRB-900 (annual) with the Railroad Retirement Board (RRB), not the IRS. A separate W-2 box (Box 14) is used to report RRTA wages. Confusing RRTA and FICA filing requirements is common. That confusion leads to penalties and adjusted tax bills.
Bottom Line
If you employ any railroad workers, you can’t simply apply standard FICA rates and schedules. RRTA and RUIA require specialized calculations, separate reporting, and compliance with RRB deadlines. A single misclassification or miscalculation affects 26–52 paychecks and triggers multi-year adjusted assessments. Don’t assume the standard rules apply here.
Frequently Asked Questions
Most employees working for Class I and Class II railroads are covered by RRTA. Additionally, employees of certain transit systems and those who perform services related to moving railroad cars or operating on-track equipment are covered. Short-line railroads and some other railroad employers may have exemptions. The Railroad Retirement Board maintains the official list of covered employers.
Tier I is equivalent to Social Security tax (6.2% employee and 6.2% employer) on wages up to an annual wage base. Tier II is a supplemental pension tax unique to railroad workers that varies by railroad (0.9% to 5.85% employee, 3.5% to 11.15% employer). Together, they can exceed 15% of payroll, far higher than standard FICA.
RRTA taxes are filed with the Railroad Retirement Board (RRB), not the IRS. Form RRB-6401 is filed quarterly to report wages and taxes withheld. Form RRB-900 is the annual reconciliation report. W-2 forms must report RRTA wages separately in Box 14. Filing with the IRS instead of the RRB is a serious compliance error.
Expert railroad tax management for your workforce.
Netchex handles RRTA Tier I, Tier II, and RUIA calculations and RRB filing so railroad employers stay compliant with specialized tax requirements.
This guide reflects publicly available product information and independent reviewer data (G2, Capterra, Trustpilot, Yelp, Better Business Bureau, Reddit, Software Advice, GetApp) as of 2026. Feature availability and pricing may vary by plan. Contact each provider for current details.
Disclaimer: Any product roadmap or future plans provided herein are for informational purposes only. They do not represent a commitment to deliver any material, code, feature, or functionality. Plans may change without notification. The development, release and timing of any features or functionality described remain at the sole discretion of Netchex, its affiliates, and partners. Netchex does not give legal, tax, or accounting advice. You are responsible for ensuring your use of Netchex product meets your individual business and compliance requirements.
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