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RS 02605: Work Outside the U.S.A.

Effective Dates: 09/22/2006 - Present

TN 12 (12-04)

A. Introduction

Beneficiaries employed or self-employed while under FRA are required by law to file an annual report. Such reports are received by letter or other voluntary report, or in connection with the foreign enforcement survey (see RS 02655.010).

B. Procedure - When to Use Form SSA-7163 (Questionnaire About Employment or Self-employment Outside the United States)

Use Form SSA-7163 in the following situations:

1. Suspend Payments

Suspend payments if there is sufficient information in the report of work to do so. If more information is needed, send the beneficiary an SSA-7163.

2. Resume Benefits

Do not make a determination to resume benefits without a completed SSA-7163 or equivalent information in file.

3. Continue Benefits

Continue benefits and send the beneficiary an SSA-7163 if the work information is incomplete, but indicates that deductions will not apply.

  1. Diary the case for 60 days and send a notice with the SSA-7163 advising the beneficiary that failure to return the form within 60 days will cause benefits to be suspended.

  2. Suspend benefits if the completed SSA-7163 is not received before the diary period ends.

  3. Do not resume payment without a completed SSA-7163 or equivalent information in file.

4. Rep Payee Fails To Return SSA-7163

When a representative payee fails to return an SSA-7163 or equivalent information within 60 days after the form was mailed to him or her, contact the beneficiary to determine:

  1. whether payments should be continued, and if so,

  2. whether another representative payee should be selected.

This is necessary to assure that the beneficiary will not be subjected to hardship because the representative payee fails to protect the beneficiary's interests. See GN 00504.110.

NOTE: The SSA-7163 is also used to develop the effect of employment or SE outside the U.S. which comes to light at the time of application of benefits.

C. Procedure - Preparation and Evaluation of SSA-7163

Use the SSA-7163 (see RS 02605.050 for exhibit) to elicit information to determine the months for which deductions apply under the FWT, and the years for which deductions could apply under the AET.

1. Identifying Information

Complete before the SSA-7163 is given to the beneficiary:

  1. 1st Line — name and SSN of the NH on whose account benefits are being paid.

  2. 2nd Line — name of employed or self-employed beneficiary and his SSN if different from the NH's.

2. Item 1

  1. If any facts elicited are known in advance, enter them before the SSA-7163 is given to the beneficiary for completion and signature.

  2. Otherwise, explain on the form or in a covering letter the periods of work for which the beneficiary is to give information.

3. Item 2

It is necessary to know the number of hours a month the beneficiary worked to apply deductions under the FWT.

  1. Evaluate answers as explained in RS 02605.005.

  2. Assume that the beneficiary worked during all hours of the period shown in item 1, unless he or she alleges otherwise.

4. Item 3

  1. Accept allegations that employment outside the U.S. is not covered in the absence of information to the contrary.

    • Obtain a copy of Form W-2, a statement from the employer, or a statement of earnings from OCRO to verify that wages are being properly reported if covered employment is alleged.

    • Obtain an SSA-7773-SM (Annual Report of Earnings) if covered wages in any year for which deductions could apply exceeded the annual earnings limitation.

  2. If the beneficiary is currently working in covered employment, get an estimate of current year earnings.

5. Item 4

Assure that beneficiaries who were self-employed for periods in item 1 check the “yes” or “no” block relating to U.S. citizenship or legal residence.

  • If the “no” block is checked, the FWT will apply based on the information in items 1 and 2.

  • If the “yes” block is checked, the beneficiary should go on to item 4(b).

NOTE: Item 4(b) pertains to options under totalization agreements. Under certain agreements beneficiaries may have the right to select coverage under the Social Security system of either country party to the agreement. If 4(b) is answered yes, then earnings would be non-covered and subject to the FWT. Item 4(b) is extremely limited in scope, and applies only to dual national beneficiaries covered under the U.S. - Italian totalization agreement at this time.

6. Item 5

Assume that no income exemption or deduction was allowed for foreign earned income when determining net earnings (NE) from SE (NESE) if the beneficiary failed to furnish IRS Form 2555 (Foreign Earned Income). See RS 02605.001C.2.

7. Item 6

If the beneficiary is currently self-employed, get a current year estimate of net earnings. Any deductions will be based on the estimated amount.

8. Item 7

Ensure that all blocks are completed. If signed with an “X” or other mark, require that all witness blocks be completed. If a claimant signs by thumb or fingerprint, do not require witnesses to the signature. If applicable, follow signature procedures in GN 00201.015F.6.

D. Procedure - Action Required Upon Return of Completed SSA-7163

The following actions are required upon return of a completed SSA-7163 to the PSC:

1. PSC

Refer completed Forms SSA-7163 to the CA for a work deduction determination.

2. OIO

Refer completed Forms SSA-7163 to the BA for a work deduction determination. Apply the FWT when:

  1. The beneficiary is neither a U.S. citizen nor legal resident of the U.S. and is self-employed outside the U.S. See RS 02605.030 for explanation of when a self-employed U.S. citizen may be subject to the FWT.

  2. The beneficiary is a U.S. citizen or an alien employed by a foreign employer outside the U.S. Assume the employer is foreign if his or her address in item 1 is foreign, unless item 3(a) is checked “yes”.

NOTE: See RS 02605.020E. for a more detailed explanation of which work test applies in specific situations.

In all other situations, send the case to a CA via Form SSA-559 for a work determination and processing.

3. OIO - Work Notices for Disabled Claimants

OIO follows the following procedure to process work notices for disabled claimants:

  1. When a BA receives notice indicating that a disabled claimant is working, refer the folder to the DDS, ATTENTION: Benefit Earnings Technician, via Form SSA-559.

  2. Determine if benefits should continue, and if necessary, establish diary controls under the Automated Continuing Investigation of Disability program.

NOTE: When a non-disabled beneficiary is reinstated following a deduction due to foreign work, and he or she subsequently returns to work, he or she must complete a Form SSA-7163 covering the new period of work activity.

E. Procedure - Determining the Work Test

1. U.S. Citizen Employed Outside the U.S.

If employment is...

then apply...

  1. Active service in U.S. Armed Forces.

AET

  1. Covered under the Act for:

    • an American employer

    • a foreign affiliate of U.S. employer, where employer has entered into an agreement with IRS for coverage.

AET

  1. Not covered under the Act because it is for an employer other than above, or because it is specifically excluded or exempted from coverage.

FWT

  1. Covered under the Act because on U.S. vessel or aircraft, and

    • contract of employment entered into in U.S., or

    • during performance of contract of employment, vessel or aircraft touched a port or airfield in the U.S.

AET

2. U.S. Resident Alien Employed Outside the U.S.

If employment is...

then apply...

  1. For an American employer.

AET

  1. Effective April 20, 1983, for a foreign affiliate of U.S. employer where employer has entered into an agreement with IRS for coverage (See RS 01901.070)

AET

  1. Active service in U.S. Armed Forces.

AET

  1. Covered under the Act because on U.S. vessel or aircraft, and

    • contract of employment entered into in U.S., or

    • during performance of contract of employment, vessel or aircraft touched a port or airfield in the U.S.

AET

  1. Not covered by the Act because none of the above apply.

FWT

3. Nonresident Alien Employed Outside the U.S.

If employment is...

then apply...

  1. Active service in U.S. Armed Forces.

AET

  1. Covered under the Act because on U.S. vessel or aircraft, and

    • contract of employment entered into in U.S., or

    • during performance of contract of employment, vessel or aircraft touched a port or airfield in the U.S.

AET

  1. Not covered under the Act because none of the above apply.

FWT

4. Self-Employment Outside the U.S.

If service is self-employment ...

then apply...

  1. Performed outside the U.S. by U.S. citizen or resident alien (including ministers who have been granted exemption from coverage—See RS 02605.001C.1.d.)

AET

  1. Performed outside the U.S. or in Puerto Rico, U.S. Virgin Islands, Guam, or American Samoa, by nonresident alien (i.e., an alien who does not reside in one of the above areas, as well as the 50 States, D.C., or the Northern Mariana Islands. (See RS 02605.001B.2.)

FWT

  1. Providing income which, if carried on in the U.S., would be not be subject to the work tests, such as rentals from real estate, capital gains, dividends, interest, community income, retirement pay to partners who rendered no services, or limited partnership income. (See RS 02605.001C.4.)

    NOTE: Normal coverage rules may change if the employment or self-employment is performed in a country with which the U.S. has a totalization agreement.

 

F. Procedure - Imposing the Work Test

1. AET

If the AET applies:

  1. Impose temporary work deductions as required by the beneficiary's estimate of annual earnings and monthly work status.

  2. Send a notice to the beneficiary explaining that his or her work is subject to the AET.

  3. Enclose a copy of SSA Publication No. 05-10137 (Your Payments While You Are Outside the U.S.) with the letter.

2. FWT

If the FWT applies:

  1. Impose deductions if the employment or self-employment is noncovered work (see RS 02605.005).

  2. Send a letter to the beneficiary (and the publication as above) explaining the action taken, and asking him or her to let us know if he or she is no longer working for more than 45 hours a month outside the U.S.

3. Both Tests Apply

If both tests apply:

  1. Assess deductions by withholding monthly benefits first under the FWT.

  2. Evaluate under the AET next with respect to all earnings which are covered under the Act.

G. Procedure - Use of LMETY for Beneficiaries Outside the U.S.

Establish a Last Monthly Earnings Test Year (LMETY) as follows:

1. When to Apply

  1. See RS 02501.030 for an explanation of the LMETY.

  2. Establish a “nonservice month” for a beneficiary outside the U.S. the same as for a beneficiary in the U.S.; i.e., a month in which the beneficiary does not work in self-employment, does not earn more than the monthly exempt amount in wages, and is not subject to the FWT.

  3. Establish the beneficiary's “grace year” if he or she is outside the U.S. the same as if he or she were in the U.S.; i.e. it will be the first taxable year after 1977 in which the beneficiary has a nonservice month (as defined in RS 02605.020G.1.b.) in or after the month in which he or she is initially entitled to benefits.

2. Example – Establishing the LMETY

A beneficiary residing in Austria became entitled in January 2001, but received benefits only for the months June through September in 2001 and June through September in 2002 due to foreign work deductions for all other months. In January 2003 he came to the U.S. and earned $20,000. Since the beneficiary had a nonservice month in 2001, the LMETY is not available for 2003, even though that is the first year the AET applies to the beneficiary. The LMETY was first available for 2001, the first year in which the beneficiary had a month in which he did not work in self-employment, did not earn more than the monthly exempt amount in wages, and was not subject to the FWT.

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RS 026: Foreign Deductions
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