TN 4 (09-85)

RS 02201.020 Correction to a Self-Employed Person's Earnings Record in the Sixth District, Grigg v. Finch

Citations:

Social Security Act, Sections 205(c)(4)(C),

205(c)(5)(F), AR 86-20(6) - Grigg v. Finch,

418 F. 2nd 661, 6th Circ. 1969.

A. Introduction

The Grigg Acquiescence Ruling, applicable at all adjudicative levels, pertains to whether an IRS Form 1099 filed by a third party constitutes an “informational return” within the meaning of section 205(c)(5)(F) of the Act, in order to permit inclusion of SEI for a barred year in an individual's E /R.

B. Background

Mr. Grigg filed a DIB claim and was denied for lack of insured status. Mr. Grigg attempted to establish additional QC's for 1956 and 1957 based on IRS Form 1099 (ie., information returns about certain kinds of payments made to a taxpaper) filed with IRS by the Detroit Conservatory of Music. Mr. Grigg did not file 1956 or 1957 tax returns and the statutory limitation for correcting the E/R had run.

C. Policy Principle

1. SSA Policy General

  1. When the time limit for correction of the E/R has expired and the NH did not file a timely tax return of SEI for that year, the absence of an entry of SEI for that year is considered conclusive evidence that no such income was earned during that year.

  2. The timely filing of Form 1099 by a third party is not considered filing a tax return by the NH for purposes of correcting the E/R.

2. Grigg Decision

In the Grigg decision, the court applied section 205(c)(5)(F) and required SSA to credit the NH with SEI for the year, even though he did not file a tax return for the year. The court found that the 1099 forms filed by the Detroit Conservatory of Music satisfied the requirements for inclusion as “tax returns or portions thereof including information returns and other written statements) filed with the Commissioner of Internal Revenue.”

D. Operating Policy

1. Ruling Applies If

The NH resides in Michigan, Ohio, Kentucky, or Tennessee at the time of the determination or decision at any level of Administrative review; i.e., initial, reconsideration, Administrative Law Judge hearing or Appeals Council review.

2. A NH May Request SSA to Credit Alleged SEI

  1. In which the NH did not file an income tax return reflecting SEI; and

  2. For which the statutory time limitation for filing a tax return and correcting the E/R has run.

3. When SSA Will Credit SEI

  1. The worker's receipt of SEI is documented by Internal Revenue Service Form 1099 and

  2. The Form 1099 is timely filed by disinterested third parties;and

  3. The Form 1099 reflects payments to the worker in the period alleged.

NOTE: In order to credit SEI under the Grigg decision all of the above requirements must be met and may not be substituted for any other required procedures.

E. Procedures

1. Determine NESE

Since the Form 1099 will show only the gross amount of money paid to the NH, determine the amount of NESE (i.e., the amount received shown on the 1099 should be reduced by the amount of worker's deductible expenses).

2. Prepare SSA-7000-U5

Prepare SSA-7000-U5 to correct the E/R.

3. Prepare Special Determination

Prepare a special determination if SEI is based on Grigg. Send a copy to

OISP, Division of Coverage
Coverage and Wages Branch
3-F-26 Operations Bldg.
Baltimore, MD 21235-6401.

Mark the envelope Grigg v. Finch.