TN 24 (05-98)

RS 02510.015 Closed Year Work Reports (Annual Report of Earnings)

A. Policy

1. Who Must Report

A beneficiary who meets all of the following is required by law to file an annual report of earnings:

  1. Was entitled to 1 or more months' benefits during the year;

  2. Was entitled to retirement, or survivors benefits (but not on the basis of their own disability);

  3. Had earnings of more than the yearly exempt amount;

  4. Was under FRA (Full Retirement Age) for at least 1 month of the year;

  5. Received benefits for at least one month of the year before attaining FRA.

NOTE:The beneficiary or his/her representative can make the report (see GN 03001.012). For reports due on or after 4/15/97, SSA may consider the earnings information on the W-2 and the SE tax return as the annual report of earnings required by law. SSA will use that information along with other pertinent information on the record to adjust benefits under the earnings test. Beneficiaries will need to provide additional information only when the information used by SSA is incorrect or incomplete and affects the payments of benefits.

2. Who Should Report

As noted above, for reports due on or after 4/15/97 (1996 and later reports) SSA may consider the information on the W-2s and the SE tax returns to be the annual report that is required by law. Beneficiaries still have primary responsibility for providing information to SSA to ensure that the correct earnings and other information is used to adjust benefits under the earnings test. A beneficiary who meets one or more of the following situations should submit a report to SSA, explaining the situation that is involved:

  1. The beneficiary is eligible to receive benefits under the monthly earnings test and has not previously given us the information, or the information previously provided has changed and benefits are affected.

  2. Some, or all of the earnings reported on the W-2 was for work done in years prior to the reporting year and are not shown in the "Nonqualified plan" box on the W-2 and were not previously reported to SSA. (See RS 02510.016 - RS 02510.020.)

  3. The beneficiary earned wages above the applicable exempt amount and also had a net loss in self-employment. (See RS 02510.017B.)

  4. The beneficiary had wages reported on a W-2 that will also be reported on a self-employment tax return, (e.g. minister or church worker).

  5. The beneficiary filed a self-employment tax return but did not perform any services in the business (SEI exclusion provision may apply.) (See RS 02505.125),

  6. The beneficiary is self-employed and files on a fiscal year basis.

  7. The beneficiary is a farmer, filed a self-employment return reporting earnings of more than the applicable exempt amount and received Federal Agricultural Program Payments or had income from carry-over crops.

  8. The beneficiary estimated earnings over the exempt amount and had some benefits withheld during the year. However, the beneficiary had no earnings for the year, i.e., no wages and no self-employment income. The might happen if the beneficiary is self-employed and suffers an unexpected loss in self-employment.

  9. Requests prorated or deferred work suspension. (See RS 02501.120.)

3. What to Report

The following information must be reported when filing an annual report of earnings:

  1. Name, address and claim number of the beneficiary.

  2. Taxable year being reported.

  3. Total wages earned in the year (regardless of amount paid).

  4. Amount of net earnings or net loss from self-employment.

  5. Nonservice months (if monthly test applies).

  6. Stop work month and year (if applicable).

  7. Name and address of person making the report.

4. When to Report

An annual report must be filed on or before April 15 of the year following the taxable year, if the taxable year ends on December 31. If the beneficiary files based on a fiscal year, the report is due 3 months and 15 days after the close of the fiscal year.

NOTE:If a due date falls on Saturday, Sunday, legal holiday or Federal nonwork day, the due date is the next working day.

For reports due on or after 4/15/97, SSA may consider the W-2 information and the SE tax return information to be the report. In effect, all reports will be considered to be timely filed, unless a beneficiary makes an attempt to receive benefits through fraudulent means, by failing to report the proper earnings to SSA and receiving benefits to which he or she should not be entitled.

Because the earnings reports (W-2s and SE tax returns) are considered to be the annual report required by law AND, are deemed to be timely filed, a beneficiary may, without penalty, provide SSA with an earnings report or information related to their earnings at any time throughout the year.

5. Special Tolerance

A report processed no later than 10 calendar days after the deadline is deemed timely filed. If a report cannot be filed timely, an extension may be requested (see RS 02510.022). (See GN 02604.100 for penalty situations.)

6. How to Report

Reports are made by the following methods:

  1. The initial application,

  2. Office visit or phone call.

  3. Mail

B. Operating Procedure - Special Reports

1. When an Initial Application is a Closed Year Report

An initial application is considered to be a closed year report when all of the following conditions apply:

  1. If the claim is adjudicated in January COM or later;

  2. Beneficiary is entitled for at least 1 month in the closed year, and earnings information is complete.

Consider earnings information complete if:

  • W-2's support allegation;

  • SE tax returns that support the allegation are submitted;

  • Beneficiary has pay stubs or employer's statement of wages that support the allegation;

  • Reliable records of SEI are submitted that support the allegation;

  • Beneficiary gives a reasonable basis for believing earnings are complete; or

  • No payment is possible due to amount alleged for closed year.

2. When an Initial Application Is Not A Closed Year Report

If an initial application adjudicated in or after the January COM does not contain complete earnings information (i.e., not a closed year report):

  • Do not make payment for a prior year until an annual report is filed, or the case is processed through enforcement.

  • If a final MOET determination depends on an annual report for the year of attainment of FRA, (and the claim is being processed in January Com or later for which year prior payments may be due) no payment is made prior to FRA attainment until the AR for the year of attainment is received, or the case is processed through enforcement. For prior year input purposes, the FO uses "999999" for earnings (MSOM MCS 005.025 and MSOM 36-C ). Any known non-service months should be input and the beneficiary should be told to report any change in non-service months.

  • Follow the same procedure for beneficiaries under FRA if the year is closed and an annual report is required.

3. Fiscal Year Cases

When a person reports on a fiscal year basis, the earnings are manually prorated to each calendar year and posted to his/her earnings record.

The PC:

  1. Prepares a diary to control fiscal year annual reports. The diary due date is the month the fiscal year ends.

  2. Contacts the beneficiary to get the report when the diary matures. See RS 02501.075 regarding the monthly earnings test for fiscal year cases.

C. Procedure - When to Question the Report

In general a beneficiary's report of earnings should be accepted and input without question. However, there are situations in which it may appear that the beneficiary is incorrectly reporting his/her earnings. In these cases, the beneficiary should be told of the possible problem and given an opportunity to report a different amount. The following situations indicate a need to question the amount of the reported earnings:

  1. Earnings reported over exempt amount, no service months indicated, and LMETY is available.

    ISSUE:Did the beneficiary have any non-service months (NSM)?

    ACTION: Input NSM if reported.

  2. Question raised regarding special wage payments.

    ISSUE: Are special wage payments involved? Have they been coded to the MEF? Have they been considered when the earnings were reported?

    ACTION: Input any special payments as needed and input the earnings and NSM as reported.

  3. Beneficiary appears to be reporting wages paid versus wages earned.

    ISSUE: Are the earnings being reported correctly?

    ACTION: Tell the beneficiary that wages are counted under the earnings test in the year the services were rendered for the wages earned. Ask the beneficiary if he or she considered that when reporting the wages. Input the correct amount of earnings for the year.

  4. Attained FRA, did not exclude earnings received in or after the month of attainment of FRA.

    ISSUE: What are the correct earnings for AET purposes?

    ACTION: Explain that earnings in and after the month of attainment of FRA are not counted under the earnings test. Tell the beneficiary to report only earnings prior to the month of attainment of FRA and input the reported earnings.

  5. Nonservice months are questionable when compared to earnings indicated.

    ISSUE: Are the NSMs correct?

    ACTION: Tell the beneficiary the applicable monthly exempt amount. Tell the beneficiary that a NSM applies in those months in which he/ she earned the monthly exempt amount or less. Ask for the NSM information and input the reported NSM.

  6. A discrepancy exists between the retirement date indicated and NSMs.

    ISSUE: Are the NSMs correct?

    ACTION: Tell the beneficiary about the apparent discrepancy, and ask for an explanation. Input the correct NSM.

  7. Substantial services allegation appears unreasonable unless it agrees with the evidence in file.

    ISSUE: Are the NSMs correct?

    ACTION: Tell the beneficiary why the substantial services allegation seems unreasonable. Explain the substantial services rule (see RS 02505.065) and ask the beneficiary for NSMs. Input the correct NSM.

  8. An estimate of earnings for the current year is not provided, and the beneficiary is working.

    ISSUE: Are work deductions applicable to the current year?

    ACTION: Contact beneficiary for current year estimate. (See RS 02510.005.)

  9. See RS 02510.005B.4. for a significant decline in earnings.

    ISSUE: Are the reported earnings correct?

    ACTION: Develop and document the reason for the decline (if needed).

D. Procedure - Current Year Work

When a beneficiary provides a closed year report and has not indicated that he /she has stopped working, obtain an estimate for the current year and process.

E. Procedure — Processing Reports

1. FO, PSC, TSC Process

If the beneficiary contacts the FO, PSC or TSC about filing a report, take the report and input using the PEAR screen. Be sure to ask about and input any non-service months and special wage payments if applicable. (See MSOM T2PE 003.030 for input instructions.)

2. Relationship Between Work Reports and Recomputations

  1. If a beneficiary files a report and requests a recomputation input the annual report and process the recomputation through the Post-Entitlement System (POS) (MSOM T2PE 005.001).

  2. If a beneficiary-initiated recomputation or AERO action is pending:

    • Determine if all annual reports have been filed for all year(s) needed.

    • Obtain and process the annual report(s) if the possibility of an overpayment exists.