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$5,387.40 in Tier 2 railroad retirement benefits. Mrs. Howle has
no employee contributions to recover.
Petitioners reported their $28,986.68 of Tier 2 railroad
retirement benefits and supplemental annuity benefits as “Social
Security benefits” and the $1,470 of Tier 1 railroad retirement
benefits as the “Taxable amount” on their joint 1997 Form 1040,
U.S. Individual Income Tax Return (return). Petitioners made a
$3,000 math error in adding their itemized deductions on their
Schedule A, Itemized Deductions. The Internal Revenue Service
(IRS) corrected this math error, and as a result, petitioners
received a refund of $684.63 for 1997 rather than the $2,221.93
they claimed for a refund on their return.
By letter dated April 21, 1998, Mr. Howle asked the IRS to
explain how social security and railroad retirement benefits are
taxed. The IRS responded by letter dated May 9, 1998, with
“corrected” copies of petitioners’ 1997 Form 1040, Schedule D,
Capital Gains and Losses, and Social Security Benefits Worksheet.
The IRS determined petitioners’ tax liability based on $1,470 of
Tier 1 railroad retirement benefits received and adjustments to
petitioners’ tax computations using maximum capital gains rates.
As a result, petitioners received an additional refund for 1997
of $1,395.30. However, the IRS did not account for the Tier 2
railroad retirement and supplemental annuity benefits received by
petitioners.
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Last modified: May 25, 2011