Revised February 13, 2024
XIV.4.A.1.aWho Provides Income Records
The Internal Revenue Service (IRS) provides the Department of Veterans Affairs (VA) with unearned income records including retirement income. The Social Security Administration (SSA) provides VA with earned income records.
XIV.4.A.1.bDefinition: FTI
Federal tax information (FTI) is any return or return information received from the IRS or secondary source, such as SSA. It includes any information created by the recipient (in this case, VA) from the return or return information (for example: due process letters or upfront verification development letters).FTI is not
- information provided directly by the taxpayer or third party (to include payer), including an IRS Form W-2, Wage and Tax Statement , or 1040, U.S. Individual Income Tax Return , or
- VA letters received by the claimant or beneficiary and subsequently returned to VA.
Important: Undeliverable returned mail regarding FTI requires safeguarding regardless of the original intended recipient.Reference: For IRS definitions of return and return information, see IRS Publication 1075.
XIV.4.A.1.cVA Use of FTI
VA uses FTI for
- upfront verification, and
- income verification matches (IVMs).
XIV.4.A.1.dUpfront Verification
Upfront verification allows VA to view earned income from SSA and unearned income from IRS and compare it to income information provided by an applicant seeking income-based benefits from the VA. Users should only utilize IRS/SSA return data when processing claims with claim labels identified in the table below.
| Payee Code 00 | Payee Code 10 |
|---|---|
120 - PMC - Reopened Pension | 120 - PMC - Reopened Pension |
120 - PMC - Incompetency Review-Pension | 120 - PMC - Incompetency Review-Pension |
120 - PMC - Reopened Helpless Child | 120 - PMC - Reopened Helpless Child |
180 - PMC - Initial Live Pension | 190 - PMC - Initial Death Pension |
040 - PMC - Supplemental Claim Non-Rating | 040 - PMC - Supplemental Claim Non-Rating |
040 - PMC - Supplemental Claim Rating | 040 - PMC - Supplemental Claim Rating |
Notes :
-
The match excludes dependent spouses and children on Veterans' awards.
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Earned and unearned income will be combined under one screen view using the VETERAN and S/P tabs.
-
There must be no active, suspended, or terminated Veterans Pension, Survivors Pension, Death Compensation, or Dependency and Indemnity Compensation (DIC) award existing for that beneficiary.
Exceptions:
-
The IRS/SSA return data should also be considered when processing substitution and accrued claims when an original or initial claim for pension, such as the ones listed above, is pending at the time of the claimant’s death. Follow guidance in M21-1, Part XI, Subpart ii, 3.C.4.d.
-
Do not use the IRS/SSA return data for an end product 040 that was previously denied for service-connected death or DIC.
Reference: For information on how to consider FTI when processing claims, refer to the FTI Income Reference Spreadsheet located on the Pension and Fiduciary Service homepage.
XIV.4.A.1.eIVM
The IVM compares income reported to VA by pension and Parents’ DIC recipients with IRS and SSA income records. The match also provides earned income of Veterans paid at the 100-percent rate due to individual unemployability. This match is completed after benefits have been granted.Notes:
- Old-Law Pension and Section 306 Pension beneficiaries are excluded from the match.
- The match includes spouses of Veterans Pension beneficiaries, but children are excluded.
XIV.4.A.1.fSecurity of IRS Tax Information
The IRS requires VA to have adequate programs in place to protect FTI, which includes FTI received from both the IRS and SSA.Reference: For more information on safeguarding FTI, see
End of Part XIV, Chapter 4, Section A