Rev. Proc. 71-3

Section 1. Purpose.

The purpose of this Revenue Procedure is to provide instructions for the computation of employer tax and employee tax to be reported on Form CT-1, Employer's Quarterly Railroad Retirement Tax Return -- 1971, and employee representative tax to be reported on Form CT-2, Employee Representative's Quarterly Railroad Retirement Tax Return -- 1971, under the Railroad Retirement Tax Act (chapter 22, subtitle C, Internal Revenue Code of 1954), with respect to compensation paid during 1971 for services rendered after 1936 and before 1970.

Sec. 2. Background.

The January 1971 revision of Form CT-1 and Form CT-2 will provide entry spaces and rates for computing tax with respect to compensation for services rendered after December 31, 1969. Because of the infrequency of payments of compensation for services rendered before 1970, the forms do not provide a schedule for computation of tax with respect to such compensation. Instead, a single entry line is provided for the reporting of such tax, which may be computed by reference to this Revenue Procedure. See section 7 of this Revenue Procedure, however, relating to the reporting of employee representative tax with respect to compensation earned before 1947. Forms CT-1 and CT-2 provide space for computation of the supplemental tax based on man-hours for services rendered after October 31, 1966. Accordingly, no provision is made in this Revenue Procedure for the computation of the supplemental tax.

Sec. 3. Maximum Amount of Compensation Earned in a Month That is Subject To Tax.

The employee tax, employer tax, and employee representative tax apply to compensation that does not exceed the amount shown below, for services rendered in a calendar month:

 Period in which services were rendered:

If an employee is paid total compensation by two or more employers for services rendered in a calendar month, and the total exceeds the maximum amount subject to tax for that month, the amount of compensation paid by each employer that is subject to tax should be computed in accordance with paragraph F or G of the instructions relating to Form CT-1 (except that the monthly maximum applicable to that month should be used in lieu of the amount stated in par. F or G).

If in any calendar month an individual renders services as an employee representative and as an employee, and if the total compensation paid to him for the services exceeds the monthly maximum, the measure of the employee representative tax is the monthly maximum minus the amount of compensation paid to him for services rendered during the month as an employee.

Sec. 4. Computation of Employer Tax and Employee Tax.

The schedule shown below is provided as a guide for computing the employer tax and employee tax applicable to compensation paid during 1971 for services rendered after 1936 and before 1970.

 1. Computation of employee tax on compensation for services rendered

Sec. 5. Employee Tax With Respect to Compensation Earned Before 1947.

The employee tax imposed by section 2(a) of the Carriers Taxing Act of 1937, 45 U.S.C. 261, and by section 1500 of the Internal Revenue Code of 1939 prior to its amendment by Public Law 572, 79th Congress, 2d session, July 31, 1946, C.B. 1946-2, 269, applies to compensation, not in excess of $300, earned by an employee from one or more employers in a calendar month before 1947. If an employee earned compensation of more than $300 in a calendar month before 1947, only $300 thereof is subject to the employee tax irrespective of the year or years in which such compensation is paid to the employee. If an employee earned compensation from two or more employers in a calendar month before 1947, and if the aggregate compensation paid (at any time) to such employee by all employers is more than $300 for such calendar month, each employer must report and pay employee tax with respect to that proportion of $300 which such employer's payment to the employee bears to the aggregate compensation paid (at any time) to such employee by all of his employers for that calendar month.

Sec. 6. Employer Tax With Respect to Compensation Earned Before 1947.

The employer tax applies to compensation, not in excess of $300, paid to an employee after 1946 by one or more employers for services rendered in any calendar month before 1947. The amount of such compensation that is subject to employer tax must be computed without regard to any payment made to the employee before 1947 by such employer or by any other employer. If an employee is paid total compensation of more than $300 after 1946 by two or more employers for services rendered in a calendar month before 1947, the amount of such compensation that is subject to employer tax should be computed by each employer in accordance with the rules stated in paragraph F of the instructions relating to Form CT-1 (except that the employer tax does not apply to compensation in excess of $300 for such services).

It should be noted that the amount of compensation, if any, subject to employee tax (col. (b) in sec. 4, above) generally will be less than the amount of compensation subject to employer tax (col. (f), sec. 4, above) for the reason that the latter amount must be computed without regard to compensation paid to the employee before 1947.

Sec. 7. Computation of Employee Representative Tax.

The rates shown below are applicable to compensation paid during 1971 for services rendered after 1936 and before 1970 as an employee representative.

 Period in which compensation,                Rate of employee