TN 9 (09-90)
RS 02605.010 Special Occupational Groups - Work Outside U.S.
A. Policy - Ministers
Special rules apply to ordained, commissioned or licensed ministers who perform services outside the U.S. in the exercise of their ministry.
A minister may donate his services without expectation of remuneration, even though he is offered meals and/or lodging as expressions of good will. In such cases the services are neither employment nor self-employment for work deduction purposes.
For a more detailed discussion of coverage of ministers, see RS 01901.480 through RS 01901.500, RS 01802.060 through RS 01802.073, and RS 01803.251 through RS 01803.253.
2. Taxable Years Beginning After 12/31/72
U.S. citizen ministers and members of religious orders who perform services outside the U.S. (usually missionaries) compute their NE from SE as if they were serving in the U.S. (RS 01803.251 through RS 01803.253).
EXCEPTION: This does not apply to ministers who have elected to be exempt from coverage.
U.S. citizens and resident aliens who engage in the ministry (or perform services as members of religious orders) outside the U.S. (i.e., those who do not donate their services) are subject to the annual earnings test, without regard to legal residence or elections related to coverage.
Nonresident alien ministers are subject to the foreign work test. (See RS 02605.030).
B. Policy - Servicemen Outside the U.S.
A beneficiary on active duty in the U.S. Armed Force outside the U.S. is subject to the annual earnings test, regardless of his citizenship or residence.
C. Policy - Scholarships and Fellowships
Beneficiaries who receive grants for study or research abroad generally:
are neither employees nor self-employed persons, and
are not subject to either the annual earnings test or the foreign work test.
Beneficiaries who receive grants for lecturing or teaching abroad generally are found to be employees, and are subject to one or the other work test.
D. Procedure - Scholarships and Fellowships
If a beneficiary outside the U.S. is working on a scholarship or fellowship grant,
develop his status fully under RS 02101.010, and
send the information to the appropriate program service center (PSC).
NOTE: If necessary, forward the information to the Office of Retirement and Survivors Insurance, Division of Coverage in Central Office, for a determination.
E. Policy - Peace Corps Work
Payments for services in the Peace Corps as volunteers or volunteer leaders are subject only to the AET since all such volunteer workers are engaged in covered employment.
A volunteer or volunteer leader is deemed to receive monthly earnings, which amounts must be added to any other earnings subject to the AET to determine the beneficiary's total earnings in a given month or year.
Monthly earnings must be computed, even though payment is not actually made until the end of the beneficiary's service in the Peace Corps.
Allowances and facilities furnished by the Peace Corps are not earnings for deduction purposes.
F. Procedure - Peace Corps Work
If a beneficiary in the Peace Corps alleges his earnings are materially different from the deemed amounts, contact the Director of the Peace Corps or his agent for a determination.
If the beneficiary protests the imposition of deductions for months before payment for services is received (see RS 02605.010E.c.), explain that the monthly amounts are earned when the services are performed. The fact that they are not paid until the period of service ends is not controlling.
NOTE: Since payments for services of Peace Corps personnel other than volunteers or volunteer leaders are not covered by specific provisions of the Peace Corps Act, and may be covered or noncovered depending on the usual rules of coverage, use the usual rules of coverage to determine which work test applies.
G. Policy - Apprentices
In some foreign countries children enter into an apprenticeship as part of their education. This is a substitute for the formal classroom vocational training in the U.S., and is sometimes a prerequisite for higher education in certain fields.
2. Characteristics of An Apprenticeship
The apprentice spends part of the time receiving practical, or on-the-job, training from the master, and part of the time receiving classroom training.
He receives a stipend (training allowance) which is generally commensurate with the vocation.
There is usually a written contract.
3. ER/EE Relationship
There are usually sufficient elements of control (i.e., when one or more of the elements in 2. above are present) to establish an employer/employee relationship in most apprenticeships.
If a training allowance is not paid, and services are performed pursuant to an apprenticeship agreement which expressly precludes any expectation or right to compensation, there generally will be no employer/employee relationship. Accordingly, no deductions would be applied.
NOTE: If the apprentice alleges no payment under the contract, a copy of the contract will usually verify the allegation.
H. Policy - Self-employed Farmers
Retired beneficiaries sometimes return to their native countries to live out their lives on small farms which they own. Do not assume that the farm is being operated as a trade or business, since this is often not the case. Ownership of land is not equivalent to ownership of a trade or business conducted on that land.
I. Procedure - Self-employed Farmers
Obtain a completed SSA-7163A-F4 (Supplemental Statement Regarding Farming Activities of Person Living Outside the U.S.) when a beneficiary reports that he is living on a farm or is a farmer. If applicable, follow signature proxy procedures in GN 00201.015F.6.
Be sure the completed SSA-7163-F4 contains the following information:
Ownership of the farm.
Land area of the farm.
Total area of farm under cultivation.
Inventory of farm equipment, work animals and livestock.
Assistance of a third party in managing and working the farm, and, if so, that person's relationship to the claimant.
Those duties performed by the claimant in working the farm, and those by the third party (if applicable).
Amount of money received for the sale of any produce, including any money received from the beneficiary's government.
Amount of money spent on farm expenses; e.g., seed, fertilizer, or equipment.
Identity of each crop produced on the farm, the amount produced, the amount of each crop sold or bartered, including to the government, and the amount consumed by the claimant and his family.
Make a determination on the basis of these facts in accordance with RS 01802.001, and RS 01802.080 through RS 01802.090.
NOTE: Generally, if a farm is small in acreage and yield and appears to be operated primarily to produce food for home consumption rather than to make a profit, the beneficiary would not be found to be engaged in a trade or business.