TN 7 (06-92)

GN 05010.087 SSA Action on IRS Requests for Verification of Tax Treaty Country Residence

A. Procedure — General

Take action as shown in B. and C. below when a Form(s) 5335 is received from IRS with a request for information on the basis on which SSA withheld less tax than the statutory 30 percent of one-half of the benefit.

B. Procedure — PC Initial Review of FORM 5335

Review the form and return it to the IRS office from which it was received by Optional Form (OF)-41 (Routing and Transmittal Slip), if one of the following conditions exists:

  • Item 1A (Taxpayer Identification Number) shows either no SSN or an SSN which does not belong to the beneficiary or the NH on whose account the benefits were paid;

  • The MBR shows that the beneficiary is in the U.S.; or

  • The MBR shows that the beneficiary has died.

Annotate the OF-41 to show the reason for returning the form (e.g., “Social Security number not shown,” etc.).

Do not put a copy of the IRS Form 5335, or other information about this action, in the claims folder.

C. Procedure — PC Folder Review

If none of the conditions in B. above exists, review the claims folder to determine the basis for the exemption to the withholding tax. Take action as explained in 1.-3. below.

1. Beneficiary is Not a Tax Treaty Country Resident

If the folder shows the beneficiary is not a resident of a tax treaty country, correct the AWSC coding. Compute and post any unpaid tax liability.

Return the Form 5335 to IRS by OF-41 advising IRS only that the residence information was in error and that action will be taken to correct this and collect any taxes due (see GN 05010.110 for information on withholding taxes from benefits paid to a beneficiary).

2. Beneficiary is a Tax Treaty Country Resident

Return the Form 5335 to IRS with a photocopy of the SSA-21, or other statement, showing the country of residence. Before releasing the copy of the SSA-21 to IRS, mark through (so that they cannot be read) the responses to all items except  the following:

  • Item 1;

    • EXCEPTION: Mark through this item if the beneficiary who is the subject of the IRS inquiry is not the NH.

  • Item 2;

  • Item 3 — The name of the beneficiary in the first column and the country of residence columns;

  • Item 11 — The entries relating to the beneficiary;

  • Item 12 — The entries relating to the beneficiary.

Do not send a copy of the SSA-21 to IRS if the SSA-21 was completed before SSA first applied the tax treaty exemption to residents of that country. Instead, return the Form 5335 to IRS explaining why there is no statement of residence. That is, when the tax treaty exemption was first applied to residents of that country, SSA applied the exemption to all beneficiaries who were receiving their checks in that country. No supplemental statements were secured.

3. Country of Residence is Not Known

Undertake development to determine the country of residence if the file:

  • does not contain the required evidence of the country of residence; or

  • raises a question of whether the tax treaty exemption applies, or continues to apply, to the beneficiary.

Take action as explained in 1. or 2. above when this development is complete.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0205010087
GN 05010.087 - SSA Action on IRS Requests for Verification of Tax Treaty Country Residence - 09/06/2012
Batch run: 09/06/2012
Rev:09/06/2012