--- title: "Part XIV, Chapter 4, Section C Federal Tax Information (FTI) Match: Post Award Audit (PAA) for Pension and Parents' Dependency and Indemnity Compensation (DIC) Beneficiaries" document: "M-21-1" section: "Part XIV, Chapter 4, Section C" canonical: "https://veteranai.co/va-regulations/m21-1/xiv.4.c-federal-tax-information-fti-match-post-award-audit-paa-for" source: "https://www.knowva.ebenefits.va.gov/system/templates/selfservice/va_ssnew/help/customer/locale/en-US/portal/554400000001018/content/554400000173313/M21-1-Part-XIV-Chapter-4-Section-C-Federal-Tax-Information-FTI-Match-Post-Award-Audit-PAA-for-Pension-and-Parents-Dependency-and-Indemnity-Compensation-DIC-Beneficiaries" updated: "2026-09-07T14:38:16.383102Z" --- June 17, 2025 ### XIV.4.C.1.a. Definition: PAA The _**post award audit** _(PAA) is an income match with the Internal Revenue Service (IRS) and the Social Security Administration (SSA) that allows the Department of Veterans Affairs (VA) to ensure a beneficiary continues to be entitled to VA benefits. The match is conducted only * after a grant of benefits and only if there is a current award, and * unlike upfront verification, without the initiation of a claim from a Veteran or survivor. ### XIV.4.C.1.b. Overview of the Match The table below provides an overview of the match. | **Stage**| **Description** 1| The Office of Performance Analysis & Integrity (OPA&I) selects beneficiary files for the data match and sends the files to Hines Information Technology Center (ITC).**Reference:** For more information on OPA&I selection, see M21-1, Part XIV, 4.C.1.c. 2| Hines ITC sends the file to the SSA and IRS. 3| The SSA and IRS run this file against their files. 4| Files are then returned from both the SSA and IRS. 5| Hines ITC combines the SSA and IRS files and matches the combined file against the corporate record. 6| Hines ITC performs a filter to exclude those cases where development based on income or net worth is not required.**Reference:** For more information on Hines ITC filtering of matches, see M21-1, Part XIV, 4.C.1.d. 7| For cases not filtered, Hines ITC * establishes the appropriate end product (EP) for the pension management center (PMC) * mails the appropriate letter(s) to the beneficiary, and * uploads the letter(s) to the secured Federal tax information (FTI) file repository (FFR). **References:** For more information on the * PAA EP, see M21-1, Part XIV, 4.C.1.f, and * automatic generation of compressed letter, see M21-1, Part XIV, 4.C.2.d. ### XIV.4.C.1.c. OPA&I Filtering of Matches OPA&I selects eligible beneficiary records to send to Hines ITC. Prior to selecting records, OPA&I will automatically exclude records in which the beneficiary * has a pending FTI eligible EP during the PAA match * has had an FTI eligible EP claim established within two years from the date OPA&I selects records for a PAA match * is receiving a payment of $90 due to Medicaid status as of the date of the PAA selection * has a missing cost-of-living adjustment line for the tax year of the requested match, or * is deceased. **Note:** The first two bullets apply to EP series with claim labels listed in [M21-1, Part XIV, 4.A.1.d](). ### XIV.4.C.1.d. Hines ITC Filtering of Matches Prior to releasing PAAs to the PMCs, Hines ITC will exclude the matches in which the * beneficiary is deceased * medical expenses of record exceed the higher of either the * total income of record in the corporate record, or * total countable FTI * benefit was discontinued for the full calendar year matched * total income of record for the year matched in the corporate record is greater than the total countable FTI * total income in the corporate record for the matched year is $0 and the total countable FTI is $0 * total countable FTI exceeds the income in the corporate record, for the same year, by $100 or less, or * following three statements are true * value listed in the NET WORTH field in the corporate record is $0 * the total income reported on _IRS Form 1099-INT, Statement for Recipients of Interest Income_ , is less than or equal to $100, and * the medical expenses of record exceed the greater of income in the corporate record or total countable FTI. **Exception:** Hines ITC will not exclude those cases identified for a substantial net worth discrepancy in which medical expenses exceed the greater income. ### XIV.4.C.1.e. PAA Worksheets Hines ITC will produce worksheets and upload them with the secured category description of _IRS/SSA – Verification_ within the secured FFR for all matched cases, including those that were filtered by Hines ITC. **Note:** The worksheets associated with the matches filtered by Hines ITC require no further action. **Reference:** For more information pertaining to the data shown on the PAA worksheets, see M21-1, Part XIV, 4.C.4. ### XIV.4.C.1.f. PAA EP For those matches not excluded, Hines ITC automatically establishes an EP 154 with the claim label * _Post Award Audit_ for those beneficiaries without a fiduciary, or * _Post Award Audit – Fid Review_ for those beneficiaries with a fiduciary. **Notes:** * The suspense date is automatically set for 65 days. * If at any time while the EP 154 is pending the beneficiary obtains a fiduciary, update the claim label to _Post Award Audit – Fid Review. _ **Important:** * Only one EP 154 is allowed per beneficiary record. If an EP 154 is pending and the beneficiary is selected for a subsequent PAA match, cancel the newest EP(s) and adjudicate the award using the earliest established EP 154. * Leave the EP pending until final action is taken. **Example:** An EP 154 is established on December 16, 2020, due to a PAA. A review of the record shows that a second EP 154, established October 5, 2019, is due to an income verification match (IVM). Cancel the EP that was established December 16, 2020, and work the PAA and the IVM under the EP established October 5, 2019. **Reference:** For more information on when a fiduciary may verify FTI, see [M21-1, Part XIV, 4.B.4](). ### XIV.4.C.1.g. Claims Jurisdiction for PAA Jurisdiction is determined based on the beneficiary’s address of record in the corporate record and established at the appropriate PMC. **Exception:** If the beneficiary has a fiduciary, then jurisdiction is based on the beneficiary’s address of record in the Veterans Benefits Management System (VBMS). ### XIV.4.C.1.h. Periodic Release Dates for PAA PAAs will be established twice per fiscal year to support an equitable distribution throughout the year. ## 2. Notification and Verification Requests This topic contains information on the notification and verification letters, including * independent verification * due process * compression letter * automatic generation of compressed letter * effective date of proposed action for the compressed letter, and * attachments mailed with beneficiary letter. January 25, 2017 ### XIV.4.C.2.a. Independent Verification The terms of the computer matching agreement require VA to make reasonable efforts to independently verify FTI received from the source agencies, IRS and SSA. For independent verification, VA will only send letters to the recipient of the identified income. ### XIV.4.C.2.b. Due Process Due process procedures require VA to give the beneficiary 60 days to submit evidence to show why a reduction or discontinuance should not be made. **Reference:** For more information on due process, see * [M21-1, Part I, Subpart i, 1.B](), and * [38 CFR 3.103](). ### XIV.4.C.2.c. Compression Letter Beginning in fiscal year 2016, the matching agreements with IRS (unearned income) and SSA (earned income) allow for compression of independent verification and due process. This is different from the IVMs in which two separate steps were required. The compressed letter allows VA to reduce the time it takes to process the match. **Reference:** For more information on how to process IVMs, see [M21-1, Part XIV, 4.D](). ### XIV.4.C.2.d. Automatic Generation of Compressed Letter Hines ITC will automatically issue a compressed letter to the beneficiary at the time the EP is automatically established. The letter provides the beneficiary of the identified income 60 days to respond. **Notes:** * All letters are identified with a notation, _CONTAINS FTI_. * Depending on the number of pages of the letter and attachments, automated letters are mailed in either a * blue envelope, or * a manila envelope. **References:** For information on * identifying undeliverable mail containing FTI, see [M21-1, Part II, Subpart i, 1.A.2.d](), and * safeguarding FTI, see [M21-1, Part XIV, 4.B](). ### XIV.4.C.2.e. Effective Date of Proposed Action for the Compressed Letter For the purposes of the compressed letter, VA will * presume that the FTI was received in January of the tax year matched and propose to adjust effective February 1, and * propose the most adverse action to stop the benefit effective February 1 of the tax year matched unless evidence is received to the contrary. **Important:** Although the most adverse action is proposed, claims processors must take the most appropriate action based on the evidence of record. **Reference:** For examples on final award actions, see M21-1, Part XIV, 4.C.3.d and e. ### XIV.4.C.2.f. Attachments Mailed With Beneficiary Letter VA forms will be attached to the beneficiary letter based on the IRS Source and IRS Income Type identified. Use the table below to determine the VA form(s) Hines ITC mailed to the beneficiary. | **If the match identifies FTI related to the IRS Source …**| **Then Hines ITC mails a _VA Form_ …** beneficiary's share of income, credits, deductions, etc.| [_21P-8049, Request for Details of Expenses_](). changes in corporate control and capital structure| [ _21P-8049_](). distributions from pensions, annuities, retirement or profit-sharing plans, individual retirement arrangements (IRAs), insurance contracts, etc.| [_21P-8049_](). partner’s share of income, credits, deductions, etc.| * [_21P-4165, Pension Claim Questionnaire for Farm Income_](), and * [ _21P-8049_](). shareholder's share of undistributed taxable income, credits, deductions, etc.| [_21P-8049_](). statement for recipients of certain government payments| [ _21P-4165_]() if the income type is agricultural subsidies.**Note:** A VA form is not mailed when the income type is unemployment compensation. statement for recipients of dividends and distributions| [ _21P-8049_](). statement for recipients of miscellaneous income| * _[21P-4165]()_ * [ _21P-4185, Report of Income From Property or Business_](), or * [_21P-8049_]() __ depending on the income type. Use the table below to determine what form(s) Hines ITC mailed based on the income type. | **If the income type is …**| **Hines ITC mails a _VA Form_ …** * medical payments, or * other income * _[21P-4185]()_ ,__ and * _[21P-8049]()._ rents| * [ _21P-4165_]() * [ _21P-4185_](), and * [ _21P-8049_](). royalties| * [ _21P-4165_](), and * _[_21P-8049_]()_. substitute payments for dividends| [ _21P-8049_](). statement for recipients of proceeds from real estate brokers and barters exchange transactions| [ _21P-8049_](). statement for recipients of proceeds from real estate transactions| [ _21P-4185_](). **Exception:** Beneficiaries of Parents' Dependency and Indemnity Compensation (DIC) will not receive _[VA Form 21P-8049]()_. ## 3. Final Action for PAA This topic contains information on final action of the award, including * when to take final action * additional development * finalizing the PAA claim * example 1 of final award actions, and * example 2 of final award actions. January 18, 2022 ### XIV.4.C.3.a. When to Take Final Action Do not take final action until a reasonable income verification process is completed. In most cases, the verification process is considered completed when the compressed letter is sent to the beneficiary and the 60-day response period has expired. **Note:** In all cases, final action may be taken prior to the expiration of the 60-day due process period if the beneficiary waives the due process rights. **Reference:** For an example of when further development may be required, see M21-1, Part XIV, 4.C.3.d. ### XIV.4.C.3.b. Additional Development In some instances, further development may be required. The EP must be left pending until the issue is finalized. If further development is required, but evidence received from the beneficiary could be used to adjust the benefit, take interim action while resolving the discrepancy. The effective date of the interim action should be based on the evidence of record. **Reference:** For an example of when further development may be required, see M21-1, Part XIV, 4.C.3.d. ### XIV.4.C.3.c. Finalizing the PAA Claim Once the verification and due process period are complete for PAA, take final action based on the table below. | **If the beneficiary …**| **Then finalize the award based on the …** * verifies the matched amount * verifies more income than the match amount, or * verifies less income than the matched amount with substantiating evidence | beneficiary verified amount. * verifies less income than the matched amount without substantiating evidence, and * reported income would result in the reduction or discontinuance of benefits, _or_ * the beneficiary does not respond | PAA worksheet. **Note:** In the decision notice, give the beneficiary the opportunity to provide evidence to support the claim of less income. Beneficiaries should also be provided a [_VA Form 21P-8416, Medical Expense Report_](), and given the opportunity to submit unreimbursed medical expenses that they paid to reduce an overpayment. **Reference:** For more information on time limits to submit amended income information to reduce an overpayment, see [M21-1, Part IX, Subpart iii, 1.H.1.f](). **Notes:** * Although the most adverse action is proposed, claims processors must take the most appropriate action based on the evidence of record. * The determination that a running pension award should be reduced or discontinued is not bound under the favorable finding rule found in [38 CFR 3.104(c)]() with respect to the initial award of pension. Therefore, favorable findings from the decision to grant pension do _**not**_ have to be rebutted in order to reduce a running pension award. **Important:** PMCs must store FTI created for PAA in the secured FFR folder. Documents that contain FTI can be viewed via the FTI DOCUMENTS tab in VBMS. ### XIV.4.C.3.d. Example 1: Final Award Actions ** _Scenario_** : The Veteran’s income for VA purposes (IVAP) is $0. The PAA discovered income of $1,000 in wages (considered recurring income) and $2,000 in gambling winnings (considered nonrecurring income). Veteran states as related to the wages, of being a victim of identity theft. He provided no evidence pertaining to the identity theft and he did not dispute the gambling winnings. **Result:** Take interim action to count the gambling winnings, removing the gambling winnings after it has been counted for 12 months. In the decision notice, * advise the Veteran that additional evidence is required in order for VA not to count the wages * provide the examples of proof of identity theft contained in [M21-1, Part XIV, 4.D.11.e]() * inform the Veteran that if evidence is not received regarding proof of identity theft, the final action will be taken to count the wages, and * give the Veteran 30 days to respond. After the 30 days has expired, if the Veteran * does not respond or provides insufficient evidence of identity theft, count the wages on the Veteran’s awards as recurring income, finalize the award, and provide decision notification to the Veteran, or * responds with sufficient evidence, do not count the wages, clear the EP, and provide decision notification to the Veteran. **Reference:** For more information on decision notification requirements, see [M21-1, Part VI, Subpart i, 1.B.1.b](). ### XIV.4.C.3.e. Example 2: Final Award Actions ** _Example_** : The Veteran’s IVAP is $3,000 due to the retirement income reported in the application for pension in 2019. The compressed letter was mailed to the Veteran advising him of the income identified from the PAA for tax year 2020. The PAA showed the income in the table below. The Veteran did not respond to the letter. | **Income Source**| **Income Type**| **Income**| **Income Classification** Distributions from Medical Savings Accounts| Gross Benefits| $2,000| Recurring Distributions from Medical Savings Accounts| Earnings on Distributive Excess Contribution| $200| This amount is included in gross benefits. Do not count twice. Subtract excess contributions from gross benefits after 12 months. **Result:** Continue counting the retirement income. Adjust the Veteran’s award beginning February 1, by including the $2,000 _Gross Benefits_ from the _Distributions from Medical Savings Accounts. _After 12 months, remove $200 from the $2,000 which was received from _Earnings on Distributive Excess Contribution. _Finalize the award and provide decision notice to the Veteran. ## 4. PAA Worksheet This topic contains information on the PAA worksheet, including * PAA worksheet data * PAA worksheet data definitions * determining income classification * PAA worksheet - IRS SOURCE field reads _distributions from pensions, annuities, retirement or profit-sharing plans, IRAs, insurance contracts, etc._ * sample PAA worksheet (page one), and * sample PAA worksheet (additional pages). April 2, 2020 ### XIV.4.C.4.a. PAA Worksheet Data PAA worksheets may contain the following: * applicable tax year * month and year of match * date letter mailed or the filter reason and date * Veteran’s claims information * benefit type * income recipient information * payer name and address * gross income * recurring income * nonrecurring income * unknown income, and * not income for Veterans Benefits Administration (VBA) purposes. **References:** For information on * Hines ITC filter reasons, see M21-1, Part XIV, 4.C.1.d, and * a sample PAA worksheet, see M21-1, Part XIV, 4.C.4.e and f. ### XIV.4.C.4.b. PAA Worksheet Data Definitions The table below explains the data received on the PAA worksheet. Review the income, as reported by IRS, for * income, and * net worth. | **The field titled …**| **Contains …** DATE LETTER MAILED| the date the beneficiary letter was mailed by Hines ITC. **Note:** This field will be blank if the PAA was excluded by Hines ITC. PAA WAS AUTOMATICALLY FILTERED DATE| the date the automatic filter was completed by Hines ITC to exclude the match. REASON| the automatic filter reasons for exclusion of the match, provided by Hines ITC. The following are the filter reasons: * _beneficiary reported deceased_ * _terminated for full calendar year of match_ * _current medical expenses reduce countable income to zero _ * _income of record for matched year, is greater than income reported by IRS/SSA_ * _income on award equals zero and FTI equals zero,_ or * _discrepant income is within threshold_. **Reference:** For the full description of Hines ITC filtering reasons, see M21-1, Part XIV, 4.C.1.d. C-FILE NUMBER| the file number of the pension or Parents' DIC award. SSN| the Veteran’s Social Security number (SSN). STUB| the Veteran’s stub name as it is shown in the corporate record. ENTITLEMENT CODE| one of the following: * Veterans Pension * Survivors Pension, or * Parents' DIC. INCOME RECIPIENT’S NAME| the name of the * beneficiary, or * survivor. INCOME RECIPIENT’S SSN| the SSN of the * beneficiary, or * survivor. INCOME RECIPIENT’S ADDRESS| the address of the * beneficiary, or * survivor. PAYER NAME AND ADDRESS| the name and address of the individual, business, or entity that paid the income. ACCOUNT NUMBER| the account number associated with the income paid, if applicable. GROSS INCOME| the gross amount of income, as provided by the payer of the income. IRS SOURCE| the IRS form name on which the income was reported. **Example:** _Statement for Recipients of Certain Government Payments_. IRS INCOME TYPE| the specific type of gross income as reported to IRS on the applicable IRS form. **Example:** The IRS provides VA from the _IRS Form 1099-G, Statement for Recipients of Certain Government Payments_ , the following income information: * box one, unemployment compensation, and * box seven, agriculture payments. If FTI is received documenting an individual received income reported on _IRS Form1099-G_ , the field on the PAA worksheef, IRS INCOME TYPE, will display * unemployment compensation, or * agriculture subsidies. INDICATOR 1| supplemental information provided by the income payer on the IRS form. Indicator 1 will be provided when the gross income reported to IRS is received on the following forms: * _1099-CAP, Changes in Corporate Control and Capital Structure (Info Copy Only)_ * _1099-MSA, Distributions from Medical Savings Accounts_ * _1099-Q, Qualified Tuition Program Payments_ , or * _1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans. _ **Note:** In most cases, interpretation of the information is not required, as Hines ITC will provide the income classification on the PAA worksheet. INDICATOR 2| supplemental information provided by the income payer on the IRS form. It is only available on the _IRS Form 1099-R_. **Note:** In most cases, interpretation of the information is not required, as Hines ITC will provide the income classification on the PAA worksheet. COUNT AS| the VBA income classification. **Reference:** For more information on determining how long the income should be counted on the award, see M21-1, Part XIV, 4.C.4.c. ### XIV.4.C.4.c. Determining Income Classification Claims processors must consider how long the FTI should be counted when determining the final award. Review the PAA worksheet and follow the steps in the table below to determine how long the income should be counted. | **Step**| **Action** 1| Review the COUNT AS field for each income amount received and follow the instructions in the table below. | **If the COUNT AS field states …**| **Then ...** * _Income from SSA_ , or * _Recurring Income_ * count on an open-ended basis from the first day of the month after the month during which the income is first received, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show otherwise, presume that the income was received in January of the tax year shown on the PAA worksheet. _Nonrecurring Income_| * count this income from the first day of the month after the month during which the income is first received * remove the income after 12 months, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. **Reference:** For more information regarding the effect nonrecurring income has on pension payments, see [M21-1, Part IX, Subpart iii, 1.A.6.e](). _Nonrecurring Income *_(noted with an asterisk)| review the evidence of record to determine if the income can be excluded under [38 CFR 3.272(e)](). | **If the income can …**| **Then ...** be excluded| do not count the income. not be excluded| * count this income from the first day of the month after the month during which the income is first received * remove the income after 12 months, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. In the final letter to the beneficiary, provide notice of the following: _Evidence shows you received the following income which may profit from the sale of property:_ **_[insert income]_** _If you did not receive this income through the course of business, the income can be excluded. To have the income excluded, provide us the amount of income and evidence showing the income was not received due to profit from a business, such as a letter from the income payer._**Reference:** For more information regarding the effect nonrecurring income has on pension payments, see [M21-1, Part IX, Subpart iii, 1.A.6.e](). _Not Income for VBA purposes_| * do not count this as income, and * take no further action unless other types of income are reported on the worksheet. _This amount is included in gross benefits. Do not count twice. Subtract excess contributions from gross benefits after 12 months_| * do not count this as income, and * follow the steps in the table below. | **Step**| **Action** 1| Review the Income Source on the PAA worksheet and locate the two incomes received from _Distributions from Medical Savings Accounts_. The income types should differ and will be * gross benefits, and * earnings on distributive excess contributions. 2| Review the income classification for the income type, gross benefits. Is the income classification nonrecurring? * If _yes_ , take no further action unless other types of income are reported on the worksheet. * If _no_ , go to Step 3. 3| Count the full amount of the income type, gross benefits, for 12 months. 4| After 12 months, reduce gross benefits amount by the amount of the income type, earnings on distributive excess contributions. **Reference:** For an example, see M21-1, Part XIV, 4.C.3.e. * _Unknown_ , or * blank/empty | go to Step 2. any other language| * send an encrypted e-mail to [VAVBAWAS/CO/P&F POL & PROC]() with the following information: * claim number * claimant name, and * PAA worksheet field information including the * PAYER NAME * GROSS INCOME * IRS SOURCE * IRS INCOME TYPE * INDICATOR 1, and * INDICATOR 2, and * wait for further instructions from Pension and Fiduciary (P&F) Service. 2| Review the IRS SOURCE field and follow the instructions in the table below. | **If the IRS SOURCE field states …**| **Then ...** _Changes in Corporate Control and Capital Structure_| review the evidence of record to determine if the income can be excluded under [38 CFR 3.272(e)](). | **If the income can …**| **Then ...** be excluded| do not count the income. not be excluded| * count this income from the first day of the month after the month during which the income is first received * remove the income after 12 months, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. In the final letter to the beneficiary, provide notice of the following: _Evidence shows you received the following income which may profit from the sale of property:_ **_[insert income]_** _If you did not receive this income through the course of business, the income can be excluded. To have the income excluded, provide a statement regarding the income that should be included and evidence showing the income was not received due to profit from a business. The evidence can in the form of a statement from the income payer. _ **Reference:** For more information regarding the effect nonrecurring income has on pension payments, see [M21-1, Part IX, Subpart iii, 1.A.6.e](). _Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc._| follow the instructions in M21-1, Part XIV, 4.C.4.d. **Note:** M21-1, Part XIV, 4.C.4.d only pertains to _Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc._ _Distributions from Medical Savings Accounts_| go to Step 3. **Note:** Step 3 only pertains to _Distributions from Medical Savings Accounts._ _Qualified Tuition Program Payments_| * count this income from the first day of the month after the month during which the income is first received * do not remove from the award unless there is evidence to show that the income stopped, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. 3| Review the INDICATOR 1 field and follow the instructions in the table below. **Note:** This step pertains only when the IRS SOURCE field is _Distributions from Medical Savings Accounts._ | **If the INDICATOR 1 field states (or displays) …**| **Then …** * empty (or blank) * _Disability_ * _Normal Distribution_ , or * _Not Set_ * count this income from the first day of the month after the month during which the income is first received * do not remove from the award unless there is evidence to show that the income stopped, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. * _Death_ * _Distribution to a Non-Spousal Beneficiary_ , or * _Prohibited Transaction_ * count this income from the first day of the month after the month during which the income is first received * remove the income after 12 months, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. **Reference:** For more information regarding the effect nonrecurring income has on pension payments, see [M21-1, Part IX, Subpart iii, 1.A.6.e](). _Excess Contributions_| do not count this as income. ### XIV.4.C.4.d. PAA Worksheet- IRS SOURCE Field Reads Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc. Follow the steps in the table below when the IRS SOURCE field reads _Distributions from Pensions, Annuities, Retirement or Profit-sharing Plans, IRAs, Insurance Contracts, Etc._ | **Step**| **Action** 1| Review the IRS INCOME TYPE field and follow the instructions in the table below. | **If the IRS INCOME TYPE field states …**| **Then …** _Gross distributions_| go to Step 2. * _Other income_ , or * _Unrealized appreciation_ * do not count this as income, and * take no further action unless other types of income are reported on the worksheet. 2| Review the INDICATOR 1 field and follow the instructions in the table below. | **If the INDICATOR 1 field states (or displays) …**| **Then …** * a number _1_ , or * _Total Distribution_ * count this income from the first day of the month after the month during which the income is first received * remove the income after 12 months, and * take no further action unless other types of income are reported on the worksheet. **Notes:** * If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. * A number 1 or total distribution indicates the payer of income checked Box 2b of _1099-R_. A total distribution is * one or more distributions, within the applicable tax year, in which the entire balance of the account is distributed, or * a final payment made on a periodic or installment payment. **Reference:** For more information regarding the effect nonrecurring income has on pension payments, see [M21-1, Part IX, Subpart iii, 1.A.6.e](). * a number _0_ * _Information Not Provided_ , or * _Not Checked_ | go to Step 3. any other language| * send an encrypted e-mail to [VAVBAWAS/CO/P&F POL & PROC]() with the following information: * claim number * claimant name, and * PAA worksheet field information including the * PAYER NAME * GROSS INCOME * IRS SOURCE * IRS INCOME TYPE * INDICATOR 1, and * INDICATOR 2, and * wait for further instructions from P&F Service. 3| Review the INDICATOR 2 field and use the table below to determine the action to take. | **If the INDICATOR 2 field states …**| **Then …** * _1—Early distribution, no known exception._ * _1—Early distribution, no known exception, B—Designated Roth account distribution_ * _1—Early distribution, no known exception, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts_ * _2—Early distribution, exception applies_ * _2—Early distribution, exception applies, B—Designated Roth account distribution._ * _2—Early distribution, exception applies, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts_ * _3—Disability, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts_ * _4—Death, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts_ * _7—Normal distribution, B—Designated Roth account distribution_ * _7—Normal distribution, D—Annuity payments from nonqualified annuities and distributions from life insurance contracts_ * _Annuity payments from nonqualified annuities and distributions from life insurance contracts_ * _B—Designated Roth account distribution, U—Dividends distributed from an ESOP under section 404(k)_ * _Charitable gift annuity_ * _Disability_ * _Dividends distributed from an ESOP under section 404(k)_ * _Designated Roth account distribution_ * _Early distribution from a Roth IRA_ * _Early distribution from a SIMPLE IRA in the first 2 years, no known exception_ * _Normal distribution_ * _Qualified distribution from a Roth IRA_ * _Roth IRA distribution, exception applies_ * _RRB-Supplemental_ * _RRB1—Tier 1_ * _RRB1—Tier 2_ , or * _RRB1—Vested dual benefits_ * count this income from the first day of the month after the month during which the income is first received * do not remove from the award unless there is evidence to show that the income stopped, and * take no further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. * _1—Early distribution, no known exception, 8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable_ * _1—Early distribution, no known exception, K—Distribution of IRA assets not having a readily available FMV_ * _1—Early distribution, no known exception, L—Loans treated as deemed distributions under section 72(p)_ * _1—Early distribution, no known exception, P—Excess contributions plus earnings/excess deferrals taxable_ * _2—Early distribution, exception applies, 8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable_ * _2—Early distribution, exception applies, K—Distribution of IRA assets not having a readily available FMV_ * _2—Early distribution, exception applies, P—Excess contributions plus earnings/excess deferrals taxable_ * _4—Death, 8-Excess contributions plus earnings/excess deferrals (and/or earnings) taxable_ * _4—Death, A—May be eligible for 10-year tax option_ * _4—Death, B—Designated Roth account distribution_ * _4—Death, G—Direct rollover and direct payment_ * _4—Death, H—Direct rollover of a designated Roth account distribution to a Roth IRA._ * _4—Death, K—Distribution of IRA assets not having a readily available FMV_ * _4—Death, P—Excess contributions plus earnings/excess deferrals taxable_ * _7—Normal distribution, A—May be eligible for 10-year tax option_ * _7—Normal distribution, K—Distribution of IRA assets not having a readily available FMV_ * _8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable, B—Designated Roth account distribution_ * _8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable, J—Early distribution from a Roth IRA_ * _8—Excess contributions plus earnings/excess deferrals (and/or earnings) taxable, K—Distribution of IRA assets not having a readily available FMV_ * _B—Designated Roth account distribution, L—Loans treated as deemed distributions under section 72(p)_ * _B—Designated Roth account distribution, P—Excess contributions plus earnings/excess deferrals taxable_ * _Death_ * _Distribution of IRA assets not having a readily available FMV_ * _Excess contributions plus earnings/excess deferrals taxable_ * _Excess contributions plus earnings / excess deferrals (and/or earnings) taxable_ * _J—Early distribution from a Roth IRA, P—Excess contributions plus earnings/excess deferrals taxable_ * _Loans treated as deemed distributions under section 72(p)_ * _May be eligible for 10-year tax option_ , or * _Prohibited transaction_. * count this income from the first day of the month after the month during which the income is first received * remove the income after 12 months, and * take further action unless other types of income are reported on the worksheet. **Note:** If there is no evidence to show the date in which the income is received, presume that the income was received in January of the tax year shown on the PAA worksheet. **Reference:** For more information regarding the effect nonrecurring income has on pension payments, see [M21-1, Part IX, Subpart iii, 1.A.6.e](). * _4—Death, L—Loans treated as deemed distributions under section 72(p)_ * _6—Section 1035 exchange, W—Charges or payments for purchasing qualified long-term care insurance contracts under combined arrangements_ * _B—Designated Roth account distribution, G—Direct rollover and direct payment_ * _Cost of current life insurance protection_ * _Direct rollover and direct payment_ * _Direct rollover of a designated Roth account distribution to a Roth IRA_ * _Distributions under Employee Plans Compliance Resolution System (EPCRS)_ * _G—Direct rollover and direct payment, K—Distribution of IRA assets not having a readily available FMV_ * _Recharacterized IRA contribution made for 2014_ * _Recharacterized IRA contribution made_ , or * _Section 1035 exchange._ * do not count this as income, and * take no further action unless other types of income are reported on the worksheet. any other language| * send an encrypted e-mail to [VAVBAWAS/CO/P&F POL & PROC]() with the following information: * claim number * claimant name, and * PAA worksheet field information including the * PAYER NAME * GROSS INCOME * IRS SOURCE * IRS INCOME TYPE * INDICATOR 1, and * INDICATOR 2, and * wait for further instructions from P&F Service. ### XIV.4.C.4.e. Sample PAA Worksheet (Page One) Below is a sample of the first page of a PAA worksheet.![This is a sample post award audit worksheet image.](/img/cpkm/X.9.E.4.d_Sample_PAA_Worksheet_Page_one.png) ### XIV.4.C.4.f. Sample PAA Worksheet (Additional Pages) Below is a sample of an additional page of a PAA worksheet.![This is a sample image of the additional pages of a post award audit worksheet ](/img/cpkm/X.9.E.4.e_Sample_PAA_Worksheet_Second_Page.png)