TN 10 (04-97)

GN 05010.100 Determining the Amount of the Withholding Tax


1. General

The tax amount is based on the benefit amount payable. That is, the amount before any deductions, withholding or offset for medical insurance premiums.

It includes SMI premiums, attorney fees and worker's compensation (see 3.) to the extent they reduce Social Security benefits payable.

It does not include amounts not paid because of any government pension offset.

The tax amount is computed and rounded to the nearest dime. Amounts ending in 5 are rounded up (e.g., $37.75 becomes $37.80).

2. Section 203(i) Cases

Tax is computed on the benefit amount which would be paid if section 203(i) (i.e., facility- of-payment provision) did not exist. (See example in B.2. below)

3. Worker's Compensation Cases

Worker's compensation benefits are Social Security benefits to the extent they reduce the Social Security benefits payable.

If the benefit amount for a month is not enough to cover the tax due, SSA policy is that SSA should withhold what is payable to meet tax liability. However, since SSA's systems are not able to handle such cases, no tax is withheld and the entire tax is posted to SSA's records as an unpaid tax liability.

NOTE: IRS has advised SSA that SSA is not the proper withholding agent for taxes due on the worker's compensation benefits. The proper withholding agents are State Agencies which actually pay the benefits. However at IRS's request, SSA continues to withhold taxes on these benefits until IRS negotiates for other agencies to assume withholding responsibility.


1. Computation of Tax

A, an alien, became entitled to a RIB of $459.00 a month effective January 1995. A medical insurance premium of $46.10 is withheld from his benefits and checks of $412.00 are issued. In May 1995, he moves to Spain and becomes a nonresident alien.

The tax is computed based on the $412.00 payable plus $46.10, or $458.10. The 25.5 percent tax on $458.10 is $116.80 ($116.81 rounded to nearest dime).

His monthly check is $295.20 ($412.00 less $116.80).

2. 203(i) Case

E and three Cs, all nonresident aliens, are entitled to monthly benefits of $137.00 each. E goes to work and would be subject to foreign work deductions. However under 203(i), the amounts payable to the family members remain the same.

To compute the tax, the children's benefits are considered to be the amount they would be if 203(i) were not in effect ($182.00). Thus, tax of $46.40 (25.5 percent of $182.00) is withheld from each child's benefit. E's benefit is not taxed.

 Benefit Payable Under 203 (i) Benefit Payable if 203 (i) Not in Effect Benefit Payable After Withholding Tax
E$137.00      0 $137.00
C1 137.00 $182.00   90.60
C2 137.00  182.00   90.60
C3 137.00  182.00   90.60

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GN 05010.100 - D