TN 6 (07-90)

GN 05010.300 Underpayments Due on Behalf of Deceased Beneficiaries

A. Policy

1. General

The alien status of the individual to whom an underpayment (for a month after 11/83) is paid determines if that payment is subject to alien withholding tax - not the status of the deceased beneficiary .

The amount actually paid to a nonresident alien (who is not a resident of a tax treaty country) cannot exceed the amount which would have been paid to the deceased beneficiary.

2. Payment to, or on Behalf of, Estate

Alien tax is withheld if the estate of a deceased beneficiary is a foreign entity. Withholding is required even if the heirs to the estate are U.S. citizens.

B. Procedure

1. General

Regardless of the underpayment amount, develop the alien status of the individual (e.g., spouse, child or parent of a deceased beneficiary) to whom the underpayment is to be paid if the file does not contain that information.

NOTE:  A Form SSA-795 (Statement of Claimant or Other Person) or Report of Contact can be used.

2. Payment to, or on Behalf of, Estate

Assume an estate is a foreign entity and withhold tax if the underpayment is paid to an estate (or designated individuals under a small estate statute or on behalf of an unadministered estate) under the laws of a country other than the U.S.

3. Withholding or Offset Involved

If withholding or offset for SMI premiums,attorney fees and/or worker's compensation is applicable to the underpayment month(s), deduct these items and the tax due on them from the monthly payment(s) to determine the underpayment amount.

Show these items and the tax on them on SSA's records as payments to the deceased for annual statement purposes.

Credit the underpayment and any taxes withheld from it to the SSA record of the individuals to whom it is paid for annual statement purposes.

C. Example

The following is an example of an underpayment with a SMI premium involved.

A, a nonresident alien, is entitled to a RIB of $459.00 a month. A medical insurance premium of $24.80. He receives monthly checks of $365.20 ($434.00 (amount payable after SMI withholding) less $68.80 tax). In 6/88, A dies and his benefit check dated 6/3/88 is returned uncashed. His widow, a nonresident alien, requests payment.

The amount of the underpayment payable to the widow is $365.20—the amount of the returned check. A's MBR is corrected to show tax of $3.70 withheld for the medical insurance premium for 5/88. The balance of $65.10 ($68.80 less $3.70) is deleted from the MBR and PHUS records. This amount is posted as tax on the underpayment.

NOTE:  If the widow had been a U.S. citizen, she would have received $434.00, the amount payable to A before tax withholding.

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GN 05010.300 - Underpayments Due on Behalf of Deceased Beneficiaries - 11/09/1990
Batch run: 11/09/1990