20 CFR 404.807, 404.957 and 404.959

SSR 66-30

Where the Internal Revenue Service corrected an individual's self-employment tax return within the time limitation in the Social Security Act, but evidence of the corrected tax return was not received by or known to the Social Security Administration for more than 4 years after the notice of the initial determination of award of benefits to the individual, held, the initial determination may not be reopened or revised, but the individual's social security earnings record may be revised at any time to conform to corrections of self-employment tax returns made by the Internal Revenue Service to the extent such corrections accurately reflect the individual's otherwise creditable self-employment income; however, any resultant benefit increase may be given only current and prospective effect.

In August 1958 R was awarded an old-age insurance benefit of $79.50 per month. This benefit amount was computed on the basis of self-employment income of $2,372 and $2,561 for the years 1951 and 1952. R continued to receive this benefit until November 1963 when he questioned the amount of income credited to his earnings record and requested that his benefit be increased effective August 1958, his month of initial entitlement. He submitted evidence that in 1953 the Internal Revenue Service had audited his tax returns from the years 1951 and 1952. R had accepted in writing the results of the audit, which corrected his 1951 self-employment income from $2,372 to $3,516. Upon receipt of this evidence, the Social Security Administration recalculated R's benefit amount and awarded him $95 monthly effective November 1963, the month in which the question was raised. R was further advised that the benefit increase could not be paid retroactively to August 1958, since applicable regulations precluded the revision of his initial award after the lapse of so long a period of time. R then protested this limitation on the retroactivity of payment, contending that he should be paid retroactively to August 1958.

Two questions are thus presented: (1) whether R's earnings record can be revised to conform to corrections in his tax return made by the internal Revenue Service; and (2) whether the initial determination awarding benefits to R can be reopened and revised in order to pay R the benefit increase retroactive to August 1958, the month of his entitlement, rather than from November 1963, the month in which he first presented to the Social Security Administration evidence of additional earnings.

Under the provisions of section 205(c) of the Social Security Act (42 U.S.C. 405(c)) the Secretary of Health, Education, and Welfare is authorized to establish and maintain the earnings record of an individual worker for social security purposes. This authority is further implemented by the Social Security Administration Regulations No. 4, § 404.804 (20 CFR 404.804) which provides:

". . . (a) The Administration's records (with revisions, if any, made pursuant to § 404.805 or § 404.806) of the amounts of earnings of an individual during any period in such year shall be conclusive; * * *
"(c) The absence of any entry in the Administration's records, as to the self-employment income alleged to have been derived by an individual in such year shall be conclusive that no such income was derived by such individual in such year unless it is shown that he filed a tax return of his self-employment income for such year before the expiration of the time limitation following such year * * *."

Section 404.807(b) of the Regulations (20 CFR 404.807(b)) relative to conforming earnings records with tax returns provides as follows:

". . . (b) Tax returns of self-employment income -- (1) tax returns filed before expiration of time limitation. Where action is taken to conform a record of earnings with a tax return of self-employment income filed by an individual with the Commissioner of Internal Revenue before the expiration of the time limitation following any taxable year (see § 404.804(c)) the Administration shall incorporate into its records the self-employment income of such individual for such year as evidenced by such tax return or some portion thereof but only insofar as such incorporation would make the record of earnings more nearly correct."

The facts here presented show that R did in fact file self- employment tax returns, and that such returns were audited and revised by Internal Revenue, before the expiration of the time limitation for making changes i.e., within 3 years, 3 months, and 15 days after the year for which the return was filed. R has thus rebutted by substantial evidence the presumption that entries on his earnings record accurately reflected his self- employment income. Accordingly, R's earnings record can be revised, under § 404.807(b) of the Regulations, to conform to corrections in the tax return made by the Internal Revenue Service to the extent that the returns accurately reflected R's otherwise creditable self-employment income.

Turning now to the second question, in effect the retroactivity of benefit increase, if any, flowing from the corrected earnings of R, § 404.957 of Regulations No. 4 (20 CFR 404.957) prescribes certain rules as to when an initial determination may be reopened and revised: It may be reopened and revised within 12 months from the date the notice of the initial determination is mailed to the party to such determination, or after such 12-month period but within 4 years after the date of the notice of the initial determination, upon a finding of good cause for reopening. After 4 years, the Regulation further provides, as here pertinent, that an initial determination may be reopened --

"* * * (c) At any time, when:
"(1) Such initial or reconsidered determination or decision was procured by fraud or similar fault of the claimant or some other person; or
"(2) An adverse claim has been filed against the same earnings account; or
"(3) An individual previously determined to be dead * * * is later found to be alive; or
"(4) The death of the individual on whose account a party's claim was denied for lack of proof of death is established by reason of his unexplained absence from his residence for a period of 7 years; or
"(5) The Railroad Retirement Board * * * has awarded duplicate benefits on the same earnings accounts; or
"(6) [such determination erroneously denies or credits gratuitous wage credits for World War II service]; or
"(7) [a finding is made that the worker was insured based on additional earnings credited to his earnings account under section 205(c)(5)(C), (D), or (G)]; or
"(8) Such * * * determination is unfavorable, in whole or in part, to the party thereto but only for the purpose of correcting clerical error or error on the face of the evidence on which such determination or decision was based."

Thus, under the regulations governing the reopening of an initial determination, a reopening and revision is precluded after 4 years from the date of the notice of the initial determination except as noted above. In this case, the evidence of R's additional earnings was not known to the Administration until November 1963, more than 4 years after notice of the initial determination was given R. None of the listed exceptions permitting reopening and revision is applicable here. On the basis of the information known to the Social Security Administration at the time of the initial determination, the award of benefits made to R was correct. While this determination cannot now be reopened and revised, R's earnings record may be revised to reflect the new and material evidence establishing his additional earnings. (20 CFR 404.806.)

Where a computation of a benefit amount may not be revised but the pertinent facts are clearly established and a benefit increase is in order, the Administration will nevertheless recalculate the benefit rate and pay the increased amount effective with the month in which the claimant questioned in writing the amount of his benefit or the Administration took some affirmative action in writing to question the benefit amount. Even though retroactive payments cannot be made, the regulations are not intended to bar current relief nor to preclude a revision and increase in the amount of prospective payments.

Accordingly, it is held that R may be awarded an increase in benefits effective November 1963.

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