TN 35 (02-04)

SI 02310.048 IRS Alert Development - Full Development

A. Introduction

If the SSR, FO files, and/or FO records do not clearly indicate that an IRS transaction was previously developed, follow the instructions in this section.

NOTE: These instructions also pertain to master earnings file (MEF) alerts that require development.

B. Procedure — initial recipient contact

Contact the recipient or taxpayer according to SI 02310.042 and proceed as described below. Document the results of the IRS alert development in MSSICS on the DIRS screen. See MSOM MSSICS 022.013 .

IF:

THEN:

1. Recipient no longer lives in service area.

Transfer alert and any related information to the new servicing FO. Follow the same procedures used in transferring redeterminations (SI 02305.046).

2. Recipient is deceased.

Develop only if recipient had an eligible spouse or left an estate. (See SI 02220.045, SI 02220.053 and SI 02201.023)

3. Recipient in current payment status (CO1) or force pay/due status, or in 1619(b) status, does not respond to SSA-3074 or refuses to provide information.

  1. See SI 02301.235 regarding suspension for failure to cooperate and SI 02310.005C. for limitations on the use of unverified data.

  2. If the payer is not a financial institution, attempt to obtain the necessary verification from the payer directly.

4. Recipient in a nonpayment status does not respond or refuses to provide information. (See step 3 above for 1619(b) cases.)

Stop development.

5. The income/resource is excluded.

  1. No further development is necessary.

  2. Refer to the appropriate POMS instructions shown in the chart in SI 02310.048C.3. to determine if documentation is required.

6. The transaction is an income indicator and the individual alleges that the income stopped prior to eligibility.

Document the file to reflect the individual's allegation. No further development is necessary.

7. The transaction involves a resource and the individual alleges he/she no longer owns the resource.

Develop for transfer of resources that occurred on or after 12/14/99 according to SI 01150.110 - SI 01150.126.

8. The individual agrees with the IRS data and his/her allegation of ownership, and the value of the income/resource, makes him/her continuously ineligible since either his/her date of initial eligibility or beginning with the initial month open to correction. (SI 04070.000 ff.)

Document the file to reflect the individual's allegation and take action to reduce or suspend payment according to SI 02301.010C.

9. The recipient agrees with the IRS data but he/she may not be continuously ineligible.

  1. Have the recipient (if the recipient is the taxpayer) sign (or have the taxpayer sign) the appropriate authorization form (i.e., SSA-4641-U2 or SSA-8510).

  2. Request the recipient to submit any available evidence pertaining to the transaction (e.g., bank statements). The request should be in writing per SI 02310.042B.3.

  3. If the recipient does not have sufficient evidence according to POMS instructions (as outlined in SI 02310.048C.3.), contact the payer directly using the signed authorization. (See SI 02310.048C.4.)

  4. Evaluate the evidence according to SI 02310.048C.5.

10. Recipient alleges income/resource belongs to someone else. (See SI 01140.205 for joint bank accounts.)

  1. Obtain a written explanation of ownership of the income/resource from the recipient.

  2. Have the recipient (if the recipient is the taxpayer) sign (or have the taxpayer sign) the proper authorization form (SSA-4641-U2 or SSA-8510).

  3. Have the recipient furnish evidence to support his/her allegation.

  4. If the recipient does not have sufficient evidence, contact the payer or the individual alleged to be the owner using the signed authorization form. (See SI 02310.048C.4.)

  5. Evaluate the evidence according to SI 02310.048C.5.

11. Recipient denies knowledge of transaction; recipient is not taxpayer (e.g., is a deemor). (If the recipient is the taxpayer, follow 12. below.)

  1. Obtain (or request the recipient obtain) a signed authorization form from the taxpayer (SSA-4641-U2 or SSA-8510).

  2. Obtain a statement from the taxpayer regarding the transaction.

  3. If the statement is not received or is insufficient, contact the payer using the signed authorization (if one was received). See SI 02310.048C.4. for information about requesting evidence of ownership.

  4. Evaluate the evidence according to SI 02310.048C.5. See SI 01110.117 regarding the treatment of unknown assets.

12. Recipient disagrees with IRS data; recipient is the taxpayer.

Obtain any evidence the recipient has available to support his/her allegation. If evidence is not available:

  • Request the recipient to sign the appropriate authorization(s) (SSA-8510 or SSA-4641-U2).

  • Contact the payer to determine the accuracy of the IRS data. See SI 02310.048C.4.

  • Evaluate the evidence according to SI 02310.048C.5.

C. Procedure — data development

1. Underlying resources

a. General

In many situations, the IRS data will reflect a payment made in connection with an underlying resource (e.g., interest on a bank account). While the payment may constitute income for SSI purposes, the ownership of the resource may be a more significant issue.

Interviewers will not always be able to determine the type of resource involved since only the payment is shown. In these cases, question the individual carefully to determine the type of resource involved.

The chart in SI 02310.048C.3. points out the transactions which may involve underlying resources and the development required.

b. Excluded resources

Situations in which the underlying resource may not belong to the individual or may be excluded, are:

2. Self-employment

The reported payment may be self-employment income (SEI) rather than unearned income. Refer to the chart in SI 02310.048C.3. to identify the types of transactions which may involve SEI.

3. Documentation

Determine the documentation required for a particular case by the type(s) of transaction(s) involved. The following chart describes each type of transaction displayed on the IRS alerts and indicates the POMS sections which specify the documentation required for each type. The first column of the chart shows the legend which will appear on the alert to indicate the type of transaction(s) involved.

ALERT IDENTIFICATION AND DEVELOPMENT

Alert
Legend

Transaction Identification

Potential Income Development

Potential Resource Development

Agrisubs

Agricultural Subsidies

Source: Governmental agencies, usually Federal. See SI 02310.049.B.7.

POSSIBLE SEI — Net Earnings from Self Employment (NESE) - SI 00820.200 and RS 01803.210.

Property essential to self-support - SI 01130.500

Bank Incentive Payment

Cash gift or incentive payment to open an account (e.g., checking, savings, certificate of deposit)

Source: Financial Institution

Considered Interest SI 00830.500A

Excluded from countable income for SSI purposes

Bartering

Bartering

Source: Noncash trading activity performed through brokers or with business entities

Unearned income - SI 00830.001 - POSSIBLE SEI N/E from S/E - SI 00820.200.

Determine according to type of item received.

Business Act

Business Act

Source: Business Activity. BE ALERT TO UNDERLYING RESOURCES.

Possible SEI N/E from S/E – SI 00820.200.

Property essential to self-support - SI 01130.500.

Capital Gains

Capital Gains

Source: Sale of an asset or a change in corporate control or capital structure. BE ALERT TO UNDERLYING RESOURCES.

Not Income.

Validity of transfer of resource - SI 01150.001. Distinguishing resources from income - SI 01120.005.

Co-op
Dividends

Non-patronage dividend/Retained allocation/Redemption Amount

Source: Membership in a business cooperative. See SI 02310.049.B

Dividends and Interest - SI 00830.500

Stocks - SI 01140.220.

Corporate Control

Cash Received/

Fair Market Value of Stock/Fair Market Value of Property

Possible SEI/NE from S/E – SI 00820.200

Stocks – SI 01140.220, SI 01150.005

Real Property – SI 01130.100

Disqualified Interest

Disqualified Interest

Source: Mutual funds, time deposits. This is an indication that tax-free status of interest paid in a prior year has been changed. BE ALERT TO UNDERLYING RESOURCES.

Not income in year of report. Original receipt of interest in prior year may be income. Dividends and interest - SI 00830.500.

Time deposits – SI 01140.220.

Mutual fund shares - SI 01140.230.

Dividends

Patronage Dividend

Sources: Stocks, mutual funds, life insurance. BE ALERT TO UNDERLYING RESOURCES.

Dividends and interest - SI 00830.500.

Stocks - SI 01140.220. Mutual fund shares - SI 01140.230.

Life insurance - SI 01130.300.

Educational Accounts

Educational Accounts

Source: Distribution from a qualified tuition account defined under section 529 of the Internal Revenue Code (IRC) or a Coverdell education savings account (ESA) defined under section 530 of the IRC.

Income if distributed to the beneficiary of the section 529 qualified tuition account -SI 00830.001.

Not income if distributed to the individual who funded the section 529 qualified tuition account or if distributed to the beneficiary of the ESA.

Conversion of a resource if distributed to the individual who funded the section 529 qualified tuition account or if distributed to the beneficiary of the ESA - SI 01110.600.

Forfeit
Interest

Forfeit Interest

Source: Time deposits. Interest penalty for cashing before maturity. BE ALERT TO UNDERLYING RESOURCES.

Not Income.

Time deposits - SI 01140.210.

Government Interest

Payments

Sources: U.S. Savings Bonds, Treasury Bills, Treasury Notes, Treasury Bonds. Note: does not include interest on tax refunds.

Dividends and interest - SI 00830.500. See SI 02310.049B.6.

Development will depend on the type of security involved: U.S. Savings Bonds - SI 01140.240.

Municipal, Corporate, and Government Bonds - SI 01140.220.

Time deposits - SI 01140.210. See SI 02310.049B.6.

In-Kind Dividends

Non-cash Liquidation

Sources: Stocks, mutual funds, business cooperatives. Cash values are assigned to these in-kind distributions by the payer. BE ALERT TO UNDERLYING RESOURCES.

Dividends and interest - SI 00830.500.

Stocks - SI 01140.220. Mutual fund shares - SI 01140.230.

Interest

Original Issue Discount

Sources: Bank accounts, bonds, loans made, preferred stocks, certificates of deposit, life insurance policies, mutual funds, burial funds, escrow accounts, delayed tax refunds. BE ALERT TO UNDERLYING RESOURCES.

Dividends and interest - SI 00830.500. Burial fund interest - SI 00830.501.

Checking and savings accounts – SI 01140.200.

Loans – SI 01120.220 and promissory notes and real property agreements – SI 01140.300.

Time deposits - SI 01140.210.

Mutual fund shares - SI 01140.230.

Municipal, corporate, and government bonds - SI 01140.250.

Life insurance - SI 01130.300.

Burial contracts - SI 01130.420.

Stocks - SI 01140.220. Funds set aside for burial - SI 01130.410.

IRA

IRA

Source: Contribution to an Individual Retirement Account (IRA) or IRA Rollover.

Not income. IRA distributions are shown under the “Retirement Plan” legend or as 5H alerts (see SI 02310.052.)

Development depends on how the IRA is invested. Treatment of retirement funds as resources - SI 01120.210, SI 01330.120, SI 01330.220.

Time deposits - SI 01140.210.

Mutual fund shares - SI 01140.230.

Partnership/S

corporation Share

Business Passive/Non-passive/Ordinary Income

Source: Partnership business entity or S corporation. Partnership income may be earned income if individual declares any distributions as self-employment income. S corporation income may be earned or unearned income from S corporation. BE ALERT TO UNDERLYING RESOURCES.

Unearned Income - SI 00830.001. POSSIBLE SEI N/E from S/E - SI 00820.200.

S corporation: Wages –SI 00820.100. Self-employment director fees RS 02101.016. Dividends - SI 00830.500. Distributions – SI 00810.005. Corporate income is reported on tax return for income tax, but if not distributed it is not countable as SSI income SI 00810.005, RS 01802.015.

Resources, General - SI 01110.001.

Property essential to self-support - SI 01130.500.

S corporation: Stock - SI 01140.220. Property essential for self-support does not apply. SI 01130.501 Q & A

Prizes

Prizes

Source: Prizes and awards; Gambling winnings

Prizes and awards — SI 00830.515 and SI 00830.525.

BE ALERT TO RETENTION AS A RESOURCE - SI 01120.005.

Property

Property

Source: Fair market value of property abandoned or acquired as full or partial satisfaction of a debt (e.g., as payment of a loan) or sale of real estate.

Proceeds of a loan - SI 00815.350. Dividends and interest - SI 00830.500.

Real property - SI 01130.100.

Rents Estate Tran

Unrealized Profit or Loss

Rental income - SI 00830.500

Property essential for self-support - SI 01130.500.

Retirement Plan

Unrealized Appreciation and Other Income

Annuities, pensions, or disability payments other than SSA-SSI - SI 00830.160.

For IRA's, the development will depend on how the funds are invested. Treatment of retirement funds as resources - SI 01120.210, SI 01330.120, SI 01330.220.

Royalties

Sources: Royalties BE ALERT TO UNDERLYING RESOURCES

Royalties - SI 00830.510.

Property essential to self-support - SI 01130.500.

Security Trades

Source: Sale of asset. BE ALERT TO UNDERLYING RESOURCES

Not income

Stocks - SI 01140.220. Municipal, corporate, or Government bonds - SI 01140.250. Distinguishing resources from income - SI 01120.005.

Unemp Comp

Source: Unemployment compensation

Unemployment compensation - SI 00830.230.

BE ALERT TO RETENTION AS A RESOURCE - SI 01120.005.

Winnings

Source: Gambling activity.

Unearned income - SI 00830.525.

BE ALERT TO RETENTION AS A RESOURCE - SI 01120.005.

4. Requesting evidence

a. General

Request the payer or recipient to provide evidence from both active and inactive records. See SI 02310.049 for special situations.

When determining first of the month bank account balances, be alert to all account activity. Do not limit evidence to bank statements and passbooks. Consider the individual's check register and/or deposit slips.

b. Requesting identifying information

If the recipient denies any knowledge of the income/resource, request the payer to provide any identifying information available such as the taxpayer's address (to verify the address shown on the alert), date of birth, and/or copy of the taxpayer's signature. (Include this request on the SSA-4641-U2 if a financial institution is involved). A Numident query (RM 10240.010) may be useful to determine if the individual used other names.

c. Identifying location of bank account

Some banks use the bank account number to indicate the particular branch where an account is located. If the taxpayer is unable to provide the location for an account, a local branch of the bank may be able to identify the location of the account based on the account number.

d. Use of local sources for evidence

In some situations, the payer's address shown on the alert may be that of the payer's administrative offices. Unless other arrangements have been made with the payer, attempt to obtain evidence locally (e.g., through a local branch of a bank or brokerage firm or a local life insurance agent) before asking another FO for assistance.

e. Source of evidence is outside of service area

If evidence is not available locally, follow the instructions in GN 00904.080 when information is needed from a third party outside the FO's service area.

If an SSA-562-U3 is necessary, attach a copy of the IRS alert. (Obscure data on the alert for any transactions which do not pertain to the request for assistance.)

5. Evaluating evidence

a. General

Evaluate the evidence to determine if it satisfies the requirements specified in the appropriate POMS section for the particular type of income/resource involved.

b. Evidence establishes ownership of resource/receipt of income

If the evidence establishes that the transaction belongs to the recipient or deemor, determine if the transaction constitutes countable income or resources for SSI purposes. If the recipient previously denied ownership, advise the recipient that the evidence establishes ownership and document the file with an RC indicating that the recipient was advised that the evidence establishes ownership and that the recipient has prev