TN 10 (04-95)

RM 02201.001 Overview of Earnings Adjustment Process


Act as amended, Section 205

A. Introduction

With 6 million employers filing a total of 200 million wage reports each year, reporting errors are bound to occur. Such errors are corrected by “adjusting” Social Security Administration (SSA) earnings records so they accurately show an individual's creditable wages. SSA processes 2 million earnings adjustments each year.

B. Policy

SSA is responsible for:

  • Establishing and maintaining complete and accurate records of wages paid and self-employment income earned for each individual covered by the Social Security program.

  • Correcting any errors in earnings posted to or omitted from SSA's records.

NOTE: Corrections are permitted only within the time limits provided under the statute of limitations.

  • Providing written notice to individuals of any downward revisions made in their wages on SSA's records if they were previously notified of the former wage amounts and providing written notice to self-employed individuals of any downward revisions made to their self-employment income in SSA's records.

  • Providing individuals involved in both claims and preclaim earnings investigations a written notice (including appropriate notice of appeal rights) of SSA determinations that establish earnings not previously contained in SSA's records or that revise the amount of earnings contained in such records.

C. Process

The need for wage adjustment comes from several sources.

1. Employer Reports

Employers who identify the need to correct earlier reports will file:

  • Form 941c (Statement to Correct Information) with the Internal Revenue Service (IRS); and

  • Forms W-3c (Transmittal of Corrected Income and Tax Statements) with Forms W-2c (Statement of Corrected Income and Tax Amounts) with SSA.

  • Special reports pursuant to IRS Publication No. 957, Reporting Back Pay to the Social Security Administration. This publication states what information SSA would need from an employer who is sending us information so we can allocate backpay under a statute wages.

NOTE: Military services file special magnetic media or paper reports to remove deemed military service credits that were given to certain personnel who failed to complete 24 months of service. (See RS 01404.200 for an explanation of this provision.)

2. IRS Reports

In the course of its audit and tax examination activities, IRS may provide SSA with:

  1. Form 6494 (Correction of W-3 Transmittal) based upon Annual Wage Reporting (AWR) reconciliation contacts with employers.

  2. Form 4668 (Employer Audit Form) or W-3c and W-2c obtained from audited employers.

  3. Form 885T (Adjustment of Social Security Tax on Tip Income Not Reported to Employer) based on audit of an individual.

  4. Schedule U (U.S. Schedule of Unreported Tip Income) based on Form 4137 filed by an individual with Form 1040 and IRS audits of independent contractors.

3. SSA Earnings Investigations

  1. Program Service Center (PSC) and Office of Disability Operations (ODO) detect questionable wage postings during claims entitlement, Automatic Earnings Reappraisal Operations (AERO) and annual earnings test and continuing disability enforcement actions.

  2. Field offices identify questionable earnings in claims and preclaims earnings discrepancy actions.

  3. Office of Central Records Operations (OCRO) identifies questionable earnings during internal earnings record system validation checks, AWR reconciliation employer contact, and preclaims earnings discrepancy actions.

D. References

See RM 03870.000 and RS 01404.000 for investigating alleged earnings record inaccuracies.

See RS 01405.000 for preparation of Form SSA-7010-U5 - Notice of Determination of FICA Wages.

See RS 01510.000 for pre-1987 tax year wage corrections for State and local employees covered by Social Security and Medicare.

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RM 02201.001 - Overview of Earnings Adjustment Process - 06/19/2013
Batch run: 06/19/2013