Federal Tax Information (FTI) Match: General Information

Overview

In This Section

This section contains the topic “ Introduction to FTI Match and Corresponding Definitions.”

1. Introduction to FTI Match and Corresponding Definitions

Introduction

This topic contains information on FTI components, including

• who provides income records
• definition of FTI
• Department of Veterans Affairs (VA) use of FTI
• upfront verification
• income verification match (IVM), and
• security of Internal Revenue Service (IRS) tax information.

Change Date

February 13, 2024

XIV.4.A.1.a. Who 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.b. Definition: 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.c. VA Use of FTI

VA uses FTI for

• upfront verification, and
• income verification matches (IVMs).

XIV.4.A.1.d. Upfront 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.

Scroll sideways to see the full table.

Notes:

• The match excludes dependent spouses and children on Veterans' awards.
• 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.e. IVM

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.f. Security 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

• M21-1, Part XIV, 4.B, and
• IRS Publication 1075.