TN 54 (06-23)

GN 02604.100 When to Assess a Penalty for Late Reports

A. Policy regarding penalties under the annual earnings test, foreign work test, and child-in-care provisions

Penalties apply under the Social Security Act, if a beneficiary reports an event late, and that event affects benefits under:

  • the annual earnings test;

  • foreign work test; and

  • the child-in-care provisions.

A penalty applies when a beneficiary willfully and knowingly fails to report correct earnings to SSA by the due date, in an effort to avoid deductions under the earnings test. For example, a penalty applies when a self-employed beneficiary does not file a self-employment (SE) tax return when required, or when a beneficiary defers their wages, and fails to report this to SSA.

If the beneficiary has “good cause” for failure to report timely, the law states that there is no penalty.

B. Annual earnings test

Assess a penalty when all the following factors are present and no administrative tolerances apply (For information on administrative tolerances, see GN 02604.170):

  1. 1. 

    The annual report is late, per GN 02604.110B.1.

  2. 2. 

    For reports due after April 15, 1997, the beneficiary must meet a reporting situation listed in RS 02510.015A.2, which provides information on who should report.

  3. 3. 

    The person received and accepted a full or partial benefit for one or more months and at least a partial work deduction is required for the annual report year. (See GN 02604.115.)

    NOTE: If the worker is the number holder (NH) and they require work deductions for only auxiliary benefits, assess the penalty on the NH.

  4. 4. 

    A net overpayment for the event year results for the worker (after consideration of the adjusted reduction factor (ARF) and delayed retirement credit (DRC), or for an auxiliary beneficiary due to the work deductions and we have not waived recovery. However, if the beneficiary is “without fault” in causing the overpayment (even though we do not waive recovery), revoke the penalty. (For information on revoking a penalty, see GN 02604.170.)

C. Foreign work test and no child-in-care

Assess a penalty when all the following factors are present:

  1. 1. 

    The beneficiary received full or partial benefits for a month subject to the deduction. (For penalties regarding receipt and acceptance of benefits, see GN 02604.115.)

  2. 2. 

    The report is late. (For penalties regarding late reports, see GN 02604.110B.1.).

  3. 3. 

    There is an overpayment due to an unwaived penalty. However, if we deem the beneficiary “without fault” in causing the overpayment, revoke the penalty (even though recovery may not be waived).

See Also

  • For who must report under the annual earnings test, see RS 02510.015A.1.

  • For a description of what constitutes an acceptable report under the annual earnings test, see RS 02510.015A.3.

  • For a definition of an acceptable report under the foreign work test, see RS 02605.020

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GN 02604.100 - When to Assess a Penalty for Late Reports - 06/30/2023
Batch run: 06/30/2023