TN 13 (09-00)

GN 05010.112 Collection of Unpaid Tax Liabilities in Cases Involving Determinations Under Section 202(t)(2) of the Social Security Act

A. INTRODUCTION

When it is determined, based on a new or revised determination under section 202(t)(2) of the Social Security Act on the social insurance or pension system of a country, that citizens of that country now meet an exception to the alien nonpayment provisions, SSA will manually collect all unpaid tax liabilities incurred by those beneficiaries before any monthly benefits are paid.

COMMENT: RS 02610.001 - RS 02610.010 provides an explanation of the alien nonpayment provisions and the importance of a country's social insurance system in meeting an exception to these provisions.

B. POLICY

1. General

SSA collects all unpaid tax liabilities incurred by beneficiaries to whom benefits may be paid as a result of a new or revised 202(t)(2) determination.

The unpaid tax liability can be for any monthly benefits paid after 12/83 for months after 11/83. The tax rate applicable in these cases is the rate which was in effect at the time the payment was made (i.e., generally, 15 percent for payments made before 1/95 and 25.5 percent for payments made after 12/94).

The unpaid tax liability is collected by withholding the tax amount owed from the benefits due. It is withheld:

  1. after deductions are imposed (e.g., foreign work, in-care) and/or overpayments have been recovered; and

  2. before any monthly benefits (including those for past months) are paid.

The beneficiary is not asked to pay the unpaid tax liability by any other means (e.g., not by check or money order).

A beneficiary's unpaid tax liability is not collected from the payments due other beneficiaries entitled on the same account.

This policy is a one-time only exception to the policy of not collecting unpaid tax liabilities and is applicable only at the time the revised 202(t)(2) determination is effectuated. It does not apply to unpaid tax liabilities incurred later by these beneficiaries.

Because of systems limitations, the collection of the unpaid tax liability will appear as a benefit withheld on the annual statements, and not as a tax paid.

2. Effective Date And Countries Affected

This policy is effective with all new or revised 202(t)(2) determinations published in the Federal Register after 12/31/98.

The countries to which this policy applies are:

  • Bosnia-Herzegovina

  • Hungary

  • Lithuania

3. To Whom This Applies

This policy applies to nonresident alien beneficiaries who:

  1. are in suspense status because they do not meet an exception to the alien nonpayment provisions; and

  2. can receive payments because a new or revised 202(t)(2) determination has been made on the social insurance or pension system of the country of their citizenship.

4. To Whom This Does Not Apply

This policy does not apply to nonresident alien beneficiaries who:

  1. were eligible for payments because they met another exception to the alien nonpayment provisions.

  2. are citizens of a country for which a 202(t)(2) determination (as explained in GN 05010.112B.2.) has been made, are in suspense status, but who are not eligible for payments because they do not meet the 5-year residence requirement (as explained in RS 02610.025).

NOTE: It does not apply to these individuals if they later meet the 5-year residence requirement.

C. PROCESS

When a new or revised 202(t)(2) determination is made which permits payment to citizens of a country, SSA identifies the beneficiaries that this determination may affect and verifies their continuing entitlement to benefits. SSA then examines the file, master beneficiary record (MBR) and, if needed, Payment History Update System (PHUS) to determine whether the beneficiary has an unpaid tax liability.

If an unpaid tax liability exists, action is taken as explained in GN 05010.112D.

D. PROCEDURE

Compute the unpaid tax liability. Take manual action each month to collect it from the benefits due the beneficiary after recovering any overpayment and/or after imposing any needed deductions (e.g., foreign work).

Advise the beneficiary of the existence of the unpaid tax liability, the period for which it is/was due and the benefits from which it will be/has been collected. (Whether this notice is given before or after the tax is withheld depends on the circumstances of the case and whether payment is being made or will be made in a future month after, for example, an overpayment is recovered.)

After collecting the unpaid tax liability, change the alien tax information on the MBR to show an Alien Withholding Status Code (AWSC) of 3 for the period for which the unpaid tax liability was collected. Place a special message on the MBR showing "Per GN 05010.112, AWSC of 3 assigned for (months for which the unpaid tax liability was collected)."

Refer to Office of International Programs (OIP) all cases in which an unpaid tax liability has been collected in accordance with these instructions.

E. EXAMPLES

Example 1: Tax Due on Benefits Paid Before Effective Date of 202(t)(2) Determination

A was entitled to retirement insurance benefits (RIB) of $400.00 effective 2/95. In 9/95, SSA was advised that he left the U.S. on 3/10/95 and established residence in Hungary. He was a Hungarian citizen and did not meet an exception to the alien nonpayment provisions.

He was placed in SJ status (suspension for failure to meet an exception to the alien nonpayment provisions) effective 10/95 (the seventh calendar month of his absence from the U.S.). The MBR was annotated to show an AWSC of 8 and an Alien Retroactive Withholding Amount (ARWA) of $102.00 for each month from 3/95 - 9/95.

In 6/99, as a result of the positive 202(t)(2) determination on the Hungarian social insurance system, his case is reviewed. It is determined that, as a Hungarian citizen, he meets an exception to the alien nonpayment provisions and is due monthly benefits for the period from 1/96 to date. Action is taken as follows to:

  • Compute the benefits due.

    1/96-11/96 : $410.00 x 11 months =
    12/96-11/97: 420.00 x 12 months =
    12/97-11/98: 425.00 x 12 months =
    12/98-6/99 : 430.00 x 7 months =

    $ 4,510.00
    5,040.00
    5,100.00
    + 3,010.00
    17,660.00

  • Compute the unpaid tax liability.

    $102.00 x 7 months =

    $714.00

  • Withhold the amount of the unpaid tax liability from the benefits due.

    Benefits due
    Unpaid tax liability
    Benefits due-after collection of tax

    $17,660.00
    - 714.00

    16,946.00

  • Process the $16,946.00 (after withholding the 25.5 percent nonresident alien tax) according to normal payment procedures.

  • Annotate PHUS to show benefits of $714.00 withheld.

  • Change the MBR to show an AWSC of 3 and an Alien Monthly Withholding Amount (AMWA) of 000 for the months 3/95 - 9/95 and place a special message on the MBR to show: "Per GN 05010.112, AWSC of 3 assigned for 3/95 - 9/95."

The notice to A advises him that $714.00 has been withheld to pay the tax that should have been withheld for the payments made to him for 3/95 - 9/95.

Example 2: Overpayment Case and Tax Due on Benefits Paid Before Effective Date of 202(t)(2) Determination

  • A was entitled to RIB of $325.00 effective 2/89. In 9/93, SSA was advised that he left the U.S. on 3/24/90 and established residence in Hungary. He was a Hungarian citizen and did not meet an exception to the alien nonpayment provisions.

    A was placed in SJ status (suspension for failure to meet an exception to the alien nonpayment provisions) effective 10/90 (the seventh calendar month of his absence from the U.S.). The MBR was annotated to show an AWSC of 8 and an ARWA of $49.50 for 3/90-11/90, $50.30 for 12/90 - 11/91, $51.00 for 12/91 - 11/92, and $51.80 for 12/92 - 8/93. He is overpaid $11,865.00 (the benefits he received for 10/90-8/93).

    In 6/99, as a result of the positive 202(t)(2) determination on the Hungarian social insurance system, his case is reviewed. It is determined that, as a Hungarian citizen, he meets an exception to the alien nonpayment provisions and is entitled to monthly benefits for the period from 1/96 to date. Action is taken as follows to:

    • Compute the benefits due.

      1/96-11/96 : $360.00 x 11 months =
      12/96-11/97: 365.00 x 12 months =
      12/97-11/98: 370.00 x 12 months =
      12/98-6/99 : 375.00 x 7 months =

      $ 3,960.00
      4,380.00
      4,440.00
      + 2,625.00
      15,405.00

    • Withhold the overpayment from the benefits due.

      Benefits payable
      Overpayment
      Benefits due-after recovery of overpayment

      $15,405.00
      -11,865.00

      3,540.00

    • Compute the unpaid tax liability.

      $49.50 x 7 months =

      $346.50

    • Withhold the amount of the unpaid tax liability from the benefits due.

      Benefits due
      Unpaid tax liability
      Benefits due-after collection of tax

      $3,540.00
      - 346.50

      3,193.50

    • Process the $3,193.50 (after withholding the 25.5 percent nonresident alien tax) according to normal payment procedures.

    • Annotate PHUS to show benefits of $12,211.50 ($11,865.00 overpayment plus $346.50 tax) withheld.

    • Change the MBR to show an AWSC of 3 and an AMWA of 000 for the months 3/90 - 9/90 and place a special message on the MBR to show: "Per GN 05010.112, AWSC of 3 assigned for 3/90 - 9/90."

    • Show an AWSC of 5 and ARWA of 000 for 10/90 - 8/93.

    The notice to A advises him that $11,865.00 has been withheld to recover the overpayment for 10/90 - 8/93, and that $346.50 has been withheld to pay the tax that should have been withheld for the payments made to him for 3/90 - 9/90.

Example 3: Tax Due on Benefits Paid After Effective Date of 202(t)(2) Determination

  • A was entitled to RIB of $400.00 effective 2/96. In 12/98, SSA was advised that he left the U.S. on 3/10/96 and established residence in Hungary. He was a Hungarian citizen and did not meet an exception to the alien nonpayment provisions.

    A was placed in SJ status (suspension for failure to meet an exception to the alien nonpayment provisions) effective 10/96 (the seventh calendar month of his absence from the U.S.). The MBR was annotated to show AWSCs of 8 and ARWAs of: $102.00 for 3/96 - 11/96, $104.60 for 12/96 - 11/97, and $107.10 for 12/97 - 11/98. A is notified that he has been overpaid $10,760.00 he received for 10/96 - 11/98.

    In 6/99, as a result of the positive 202(t)(2) determination on the Hungarian social insurance system, his case is reviewed. It is determined that, as a Hungarian citizen, he meets an exception to the alien nonpayment provisions since he left the U.S. Thus, the benefits he was paid for 10/96 - 11/98 are not an overpayment although he has an unpaid tax liability for the months 3/96 - 11/98. Action is taken as follows to:

    • Delete any references to an overpayment for 10/96 - 11/98.

    • Compute the benefits due.

      12/98-6/99 : $430.00 x 7 months =

      $ 3,010.00

    • Compute the unpaid tax liability.

      3/96-11/96 : $102.00 x 9 months =
      12/96-11/97: 104.60 x 12 months =
      12/97-11/98: 107.10 x 12 months =

      $ 918.00
      1,255.20
      +1,285.20
      3,458.40

    • Determine when the unpaid tax liability will be collected from benefits due.

      Unpaid tax liability
      Benefits due through 6/99
      Remaining unpaid tax liability

      $3,458.40
      -3,010.00

      448.40

      Benefit for 7/99
      Remaining unpaid tax liability - to be collected from 8/99 benefit

      - 430.00
      18.40

    • Advise A that the benefits due him for 12/98 - 7/99 and part of 8/99 are being used to pay the nonresident alien tax of $3,458.40 that should have been withheld from the benefits he received for 3/96 - 11/98.

    • Review the file in the current operating month (COM) 7/99 and take manual action to withhold that benefit to recover the unpaid tax liability.

    • Review the file in COM 8/99 and take manual action to collect the remaining $18.40 unpaid tax liability. The resulting benefit due is processed under the normal payment procedures.

    • Annotate PHUS to show benefits of $3,458.40 withheld.

    • Change the MBR to show an AWSC of 3 and an AMWA of 000 for the months 3/96 - 11/98 and place a special message on the MBR to show: "Per GN 05010.112, AWSC of 3 assigned for 3/96 - 11/98."

    • Show an AWSC of 5 and an AMWA of 000 for the months 12/98 - 7/99.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/0205010112
GN 05010.112 - Collection of Unpaid Tax Liabilities in Cases Involving Determinations Under Section 202(t)(2) of the Social Security Act - 09/15/2004
Batch run: 01/27/2009
Rev:09/15/2004