## Chapter 9. Income Verification Match (IVM): Basic Components

#### 1. IVM Components

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on IVM components,    |
| troduction | > including                                             |
|            |                                                         |
|            | -   who maintains income records                        |
|            |                                                         |
|            | -   the definition of IVM                               |
|            |                                                         |
|            | -   handling by Pension Maintenance Centers             |
|            |                                                         |
|            | -   Veterans Benefits Administration (VBA) handling of  |
|            |     match, and                                          |
|            |                                                         |
|            | -   security for Internal Revenue Service (IRS) tax     |
|            |     information.                                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a    | > Since 1991, the Internal Revenue Service (IRS) has    |
| . Who Main | > maintained unearned income records including          |
| tains Inco | > retirement income. The Social Security Administration |
| me Records | > (SSA) maintains earned income record.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > The ***Income Verification Match*** (IVM) compares    |
| # b. Defin | > income reported to the Department of Veterans Affairs |
| ition: IVM | > (VA) by pension and Parents' Dependency and Indemnity |
|            | > Compensation (DIC) recipients with IRS and SSA income |
|            | > records.                                              |
|            | >                                                       |
|            | > The match also provides earned income of veterans in  |
|            | > receipt of compensation based on individual           |
|            | > unemployability (IU).                                 |
|            | >                                                       |
|            | > ***Notes***:                                          |
|            |                                                         |
|            | -   Old Law Pension and Section 306 Pension             |
|            |     beneficiaries are excluded from the match.          |
|            |                                                         |
|            | -   The match includes spouses of live Improved Pension |
|            |     beneficiaries, but children are excluded.           |
+------------+---------------------------------------------------------+

Continued on next page

1\. IVM Components, Continued

+------------+---------------------------------------------------------+
| ##### c.   | > The IVM match is handled by the Pension Maintenance   |
|  Handling  | > Centers (PMCs) in                                     |
| by Pension |                                                         |
|  Maintenan | -   Philadelphia                                        |
| ce Centers |                                                         |
|            | -   St. Paul, and                                       |
|            |                                                         |
|            | -   Milwaukee.                                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d. V | > VA handling of this match differs in the following    |
| BA Handlin | > ways from other matches.                              |
| g of Match |                                                         |
|            | -   In other matches, VA can combine the statutory      |
|            |     independent verification and notice requirements    |
|            |     into one step that was carried out in the notice of |
|            |     proposed adverse action. With this match, VA must   |
|            |     complete an income verification process before      |
|            |     sending the notice of proposed adverse action.      |
|            |                                                         |
|            | -   A notice of proposed adverse action is required     |
|            |     even when the beneficiary verifies receipt of       |
|            |     income. Do not confuse the verification response    |
|            |     period with the 60-day due process period.          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > Strict IRS and SSA security and release of tax return |
| #### e. Se | > information procedures require that correspondence or |
| curity for | > documents containing data directly traceable to the   |
|  IRS Tax I | > information furnished to VA by the IRS or the SSA be  |
| nformation | > kept in lightweight IVM folders in locked cabinets.   |
|            | >                                                       |
|            | > Before completion of the income verification          |
|            | > procedure, correspondence concerning tax return       |
|            | > information must go directly to the income recipient  |
|            | > or the income payer.                                  |
|            | >                                                       |
|            | > After the income verification process has been        |
|            | > completed                                             |
|            |                                                         |
|            | -   direct further correspondence to the VA             |
|            |     beneficiary, and                                    |
|            |                                                         |
|            | -   identify the income verifier as the source of the   |
|            |     income information, *not* the IRS or the SSA.       |
+------------+---------------------------------------------------------+

####   {#section .unnumbered}

#### 2. Income Verification Other Than Unearned Income From a Financial Institution (FI)

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on income             |
| troduction | > verification other than unearned income from an FI,   |
|            | > including                                             |
|            |                                                         |
|            | -   written confirmation                                |
|            |                                                         |
|            | -   neither recipient or payer respond, and             |
|            |                                                         |
|            | -   payer will not furnish information.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a. W | > Verification requirements are considered met if VA    |
| ritten Con | > receives written confirmation from either the income  |
| firmation  | > recipient or the income payer.                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > VA must make reasonable efforts to verify IRS return  |
| # b. Neith | > information from a source independent of the IRS.     |
| er Recipie | >                                                       |
| nt or Paye | > If neither the income recipient or payer responds and |
| r Responds | > the income recipient was the                          |
|            |                                                         |
|            | -   VA beneficiary, the verification requirement is     |
|            |     considered met if VA made a good faith effort to    |
|            |     contact the payer, or                               |
|            |                                                         |
|            | -   spouse of the beneficiary, the verification         |
|            |     requirement is considered met if VA made a good     |
|            |     faith effort to contact either the spouse or the    |
|            |     payer.                                              |
|            |                                                         |
|            | > ***Note***: An attempt *must* have been made to       |
|            | > contact the income payer if the income recipient was  |
|            | > the VA beneficiary.                                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > If a response is received that essentially states     |
| ## c. Paye | > that the payer will not furnish the information       |
| r Will Not | > requested, the verification requirement has not been  |
|  Furnish I | > met. Further action to verify the match amount is     |
| nformation | > required. An administrative subpoena may be           |
|            | > necessary.                                            |
|            | >                                                       |
|            | > ***Reference***: For more information on the efforts  |
|            | > to clarify disputed amounts, see M21-1MR, Part X,     |
|            | > 10.2.                                                 |
+------------+---------------------------------------------------------+

####   {#section-1 .unnumbered}

#### 3. Verification of Unearned Income Paid by an FI

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on verification of    |
| troduction | > unearned income paid by an FI, including              |
|            |                                                         |
|            | -   the definition of an FI                             |
|            |                                                         |
|            | -   types of FIs                                        |
|            |                                                         |
|            | -   when a subpoena is required to contact an FI        |
|            |                                                         |
|            | -   requesting information from an FI, and              |
|            |                                                         |
|            | -   when to issue a subpoena.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > An ***FI*** is a financial institution that           |
| ## a. Defi |                                                         |
| nition: FI | -   is located in any State, territory, or possession   |
|            |     of the United States or the District of Columbia    |
|            |     (DC)                                                |
|            |                                                         |
|            | -   is approved or licensed by a State or Federal       |
|            |     financial regulatory entity, and                    |
|            |                                                         |
|            | -   has a contractual relationship to act as a          |
|            |     depository and financial agent for the Federal      |
|            |     Government by accepting enrollment and crediting    |
|            |     payments to a customer\'s account.                  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #          | > The following are considered FIs:                     |
| #### b. Ty |                                                         |
| pes of FIs | -   banks                                               |
|            |                                                         |
|            | -   industrial loan companies                           |
|            |                                                         |
|            | -   trust companies                                     |
|            |                                                         |
|            | -   savings and loans                                   |
|            |                                                         |
|            | -   building and loans                                  |
|            |                                                         |
|            | -   homestead associations (including cooperative       |
|            |     banks)                                              |
|            |                                                         |
|            | -   credit unions, and                                  |
|            |                                                         |
|            | -   consumer finance institutions.                      |
|            |                                                         |
|            | > ***Important***: If there is doubt whether the payer  |
|            | > of unearned income is an FI, assume that it is and    |
|            | > request verification in the form of a subpoena.       |
+------------+---------------------------------------------------------+

Continued on next page

3\. Verification of Unearned Income Paid by an FI, Continued

+------------+---------------------------------------------------------+
| ###        | > Under the terms of the Right to Financial Privacy Act |
| ## c. Subp | > (RFPA), FIs must be contacted in the form of          |
| oena Requi | > subpoenas.                                            |
| red to Con |                                                         |
| tact an FI |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > Before contacting the FI, first write to the income   |
| ### d. Req | > recipient to request confirmation of unearned income. |
| uesting In | > If the recipient does not reply, VA's only recourse   |
| formation  | > is to issue a subpoena to the FI.                     |
| From an FI |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > Use the table below to determine when to issue a      |
| ## e. When | > subpoena.                                             |
|  to Issue  |                                                         |
| a Subpoena |                                                         |
+------------+---------------------------------------------------------+

  ------------------------ ----------------------- -----------------------
  When the income          And ...                 Then ...
  recipient was a ...                              

  VA Beneficiary           fails to respond        issue a subpoena to the
                                                   FI.

  spouse of a VA                                   initiate due process
  beneficiary                                      based on full amount
                                                   match without issuing a
                                                   subpoena.

  VA beneficiary or spouse the income amount       a subpoena may be
                           verified by the spouse  necessary.
                           or beneficiary is not   
                           within 10% of the       
                           amount matched          
  ------------------------ ----------------------- -----------------------

####   {#section-2 .unnumbered}

#### 4. Initial Verification Requests

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on initial            |
| troduction | > verification requests, including                      |
|            |                                                         |
|            | -   earned income                                       |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   payer letters, and                                  |
|            |                                                         |
|            | -   recipient letters                                   |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   unearned income                                     |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   payer letters, and                                  |
|            |                                                         |
|            | -   recipient letters                                   |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   incompetent payees                                  |
|            |                                                         |
|            | -   worksheets, and                                     |
|            |                                                         |
|            | -   workload control.                                   |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | February 5, 2008                                        |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > The Benefits Delivery Network (BDN) sends letters     |
| a. Earned  | > directly to *payers* of earned income.                |
| Income Pay | >                                                       |
| er Letters | > Payer letters request verification of income for the  |
|            |                                                         |
|            | -   tax year of the match, and                          |
|            |                                                         |
|            | -   following two years.                                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b. E | > Letters to recipients of earned income are bulk       |
| arned Inco | > mailed to Pension Maintenance Centers (PMCs) for      |
| me Recipie | > screening and release. Recipient letters list payers  |
| nt Letters | > and amounts reported and ask recipients for           |
|            | > certification.                                        |
|            | >                                                       |
|            | > ***Important***: PMCs should not release recipient    |
|            | > letters if the income has already been reported or if |
|            | > it will not affect entitlement to VA benefits.        |
+------------+---------------------------------------------------------+

Continued on next page

4\. Initial Verification Requests, Continued

+------------+---------------------------------------------------------+
| ##### c.   | > The BDN does not send payer letters directly to       |
|  Unearned  | > payers of unearned income because the automated       |
| Income Pay | > system cannot discriminate between FIs and other      |
| er Letters | > unearned income payers.                               |
|            | >                                                       |
|            | > Unearned income payers, including payers of           |
|            | > retirement income, that are not FIs must be contacted |
|            | > by PMCs in letter format, similar to the letters      |
|            | > automatically sent to payers of earned income.        |
|            | >                                                       |
|            | > Send these letters upon receipt of the IVM worksheet. |
|            | >                                                       |
|            | > ***Important***: PMCs should not release payer        |
|            | > letters if the income has already been reported or if |
|            | > it will not affect entitlement to VA benefits.        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > The BDN bulk mails letters for recipients of unearned |
| ### d. Une | > income to PMCs for screening and release.             |
| arned Inco | >                                                       |
| me Recipie | > ***Important***: PMCs should not release recipient    |
| nt Letters | > letters if the income has already been reported or if |
|            | > it will not affect entitlement to VA benefits.        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### e.   | > The BDN does not send a verification letter to a      |
|  Incompete | > recipient or a recipient's spouse if the master       |
| nt Payees  | > record shows the beneficiary is incompetent and not   |
|            | > paid directly.                                        |
|            | >                                                       |
|            | > The BDN will, however, send letters to the payers of  |
|            | > earned income in these types of cases.                |
|            | >                                                       |
|            | > ***Reference***: For more information on instructions |
|            | > and limitations on fiduciary contacts, see M21-1MR,   |
|            | > Part X, 10.5.                                         |
+------------+---------------------------------------------------------+

Continued on next page

4\. Initial Verification Requests, Continued

+------------+---------------------------------------------------------+
| ##### f. W | > At the same time the BDN sends letters, it produces   |
| orksheets  | > worksheets and refers them to PMCs for matched cases. |
|            | >                                                       |
|            | > If there is more than one income recipient (for       |
|            | > example, beneficiary and spouse) there is a separate  |
|            | > worksheet section for each person's income.           |
|            | >                                                       |
|            | > ***Reference***: For a sample of an IVM worksheet,    |
|            | > see M21-1MR, Part X, 9.13.                            |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > The BDN releases cases to PMCs on a priority basis as |
|  g. Worklo | > directed by VA Central Office (VACO).                 |
| ad Control |                                                         |
|            | -   Priority 1 includes cases where                     |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   income reported to the IRS exceeds income reported  |
|            |     to VA, income for VA purposes (IVAP), by \$10,000   |
|            |     or more, and                                        |
|            |                                                         |
|            | -   all IU cases, and                                   |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   Priorities 2 through 10 decrease in \$1,000         |
|            |     decrements.                                         |
|            |                                                         |
|            | > ***Note***:                                           |
|            |                                                         |
|            | -   VACO will inform PMCs of the number of cases in     |
|            |     each priority and when they will be released.       |
|            |                                                         |
|            | -   Cases where the difference between income reported  |
|            |     to IRS and income reported to VA is less than       |
|            |     \$1,000 are not referred for verification.          |
+------------+---------------------------------------------------------+

####   {#section-3 .unnumbered}

#### 5. Operational Performance and Establishing Controls

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on operational        |
| troduction | > performance and establishing controls, including      |
|            |                                                         |
|            | -   end products (EP) 154 and 314                       |
|            |                                                         |
|            | -   establishing an EP                                  |
|            |                                                         |
|            | -   suspense date, and                                  |
|            |                                                         |
|            | -   EP 600                                              |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 7, 2007                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > Use end product (EP)                                  |
| ## a. EP 1 |                                                         |
| 54 and 314 | -   154 for pension and DIC cases, and                  |
|            |                                                         |
|            | -   314 for IU cases.                                   |
|            |                                                         |
|            | > EP 154 or 314 is allowed for each payee for whom a    |
|            | > worksheet is reviewed, regardless of whether          |
|            | > development is required. In unusual situations, where |
|            | > multiple worksheets are generated at one time because |
|            | > of numerous payers, only one EP is allowed.           |
|            |                                                         |
|            | ***Notes***:                                            |
|            |                                                         |
|            | -   When worksheets are received for dependents of a    |
|            |     payee (e.g., spouse of a veteran in receipt of      |
|            |     pension), only one EP 154 is warranted for all      |
|            |     worksheets reviewed in computing the veteran's      |
|            |     countable income.                                   |
|            |                                                         |
|            | -   Do not use EP 600 when a notice of proposed adverse |
|            |     action is sent. Continue to control the case using  |
|            |     the existing EP.                                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b    | > Establish an EP when the worksheet is received. Use   |
| . Establis | > date of receipt of the worksheet as date of claim.    |
| hing an EP |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         | > The suspense date is automatically set for 60 days.   |
| ### c. Sus | > Leave the EP pending until final action is taken.     |
| pense Date |                                                         |
+------------+---------------------------------------------------------+

Continued on next page

**5. Operational Performance and Establishing Controls**, Continued

+------------+---------------------------------------------------------+
| #####      | > Do not use EP 600 when a notice of proposed adverse   |
|  d. EP 600 | > action is sent. Continue to control the case using    |
|            | > the existing EP.                                      |
+------------+---------------------------------------------------------+

####   {#section-4 .unnumbered}

#### 6. Initial Screening

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on initial screening, |
| troduction | > including                                             |
|            |                                                         |
|            | -   verification of income not required                 |
|            |                                                         |
|            | -   verification and further development unnecessary    |
|            |                                                         |
|            | -   when EP 154 or 314 are taken                        |
|            |                                                         |
|            | -   when verification of income and employment are      |
|            |     needed                                              |
|            |                                                         |
|            | -   establishing the IVM folder, and                    |
|            |                                                         |
|            | -   storing folders.                                    |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > When the worksheet is received, compare information   |
|  a. Verifi | > on this sheet with information in the master record   |
| cation of  | > and/or claims folder. Verification of income and      |
| Income Not | > further development are not required if any one of    |
|  Required  | > the following applies:                                |
|            |                                                         |
|            | -   The only income recipient is the beneficiary's      |
|            |     spouse and the spouse's income was not a factor for |
|            |     the year(s) involved.                               |
|            |                                                         |
|            | -   The veteran receives IU benefits                    |
|            |                                                         |
|            | ```{=html}                                              |
|            | <!-- -->                                                |
|            | ```                                                     |
|            | -   *VA Form 21-4140,* *Employment Questionnaire,* is   |
|            |     of record for the period covered by the worksheet   |
|            |     and the earnings and employment information are in  |
|            |     substantial agreement with what the veteran         |
|            |     previously reported on *VA Form 21-4140*, and       |
|            |                                                         |
|            | -   *VA Form 21-4140* was reviewed by the rating        |
|            |     activity.                                           |
|            |                                                         |
|            | > ***Note***: Do not consider amounts received from     |
|            | > participation in the Veterans Health Administration's |
|            | > (VHA's) Compensated Work Therapy (CWT) Program as     |
|            | > income for Improved Pension or IU purposes.           |
+------------+---------------------------------------------------------+

Continued on next page

6\. Initial Screening, Continued

+------------+---------------------------------------------------------+
| ##### b.   | > If verification and further development are           |
|  Verificat | > unnecessary, take the following actions:              |
| ion and Fu |                                                         |
| rther Deve | -   pending issue file clear (PCLR) the appropriate EP  |
| lopment Un |     154 or 314 and dispose of the worksheet under the   |
| necessary  |     appropriate Administrative Support Staff directive  |
|            |                                                         |
|            | -   remove the IVM indicator from the M11 screen with a |
|            |     CORR transaction                                    |
|            |                                                         |
|            | -   send a letter to the VA beneficiary advising that   |
|            |     his/her benefits will remain unchanged, and         |
|            |                                                         |
|            | -   annotate the copy of this notification letter to    |
|            |     show that EP 154 or 314, as appropriate, was taken  |
|            |     and note the current date.                          |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### c.   | > If an income verification form is received and the    |
| EP 154 or  | > claims folder reveals that EP 154 or 314 was taken,   |
| 314 Taken  | > dispose of this form under the appropriate            |
|            | > Administrative Support Staff directive.               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ###        | > If verification of income and employment is needed,   |
| ## d. Veri | > proceed as follows:                                   |
| fication o |                                                         |
| f Income a | -   review the worksheet to determine if the PMC must   |
| nd Employm |     initiate verification letters or subpoenas          |
| ent Needed |     (unearned income or incompetent beneficiary), and   |
|            |                                                         |
|            | -   file the worksheet in the IVM folder pending        |
|            |     receipt of payer and recipient responses or the     |
|            |     expiration of the 60-day suspense date, whichever   |
|            |     comes first.                                        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Establish an orange, lightweight folder for each case |
| e. Establi | > requiring further action.                             |
| shing the  | >                                                       |
| IVM Folder | > Tax return information (for example, the worksheet),  |
|            | > must be filed in the IVM folder.                      |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ####       | > IVM folders must be kept separately in a locked file. |
| # f. Stori | >                                                       |
| ng Folders | > ***Important***: Attach an overprint flash to the     |
|            | > claims folder to alert employees that there is an IVM |
|            | > folder.                                               |
+------------+---------------------------------------------------------+

####   {#section-5 .unnumbered}

#### 7. Effective Dates of Adjustment for Pension and Parents' Dependency and Indemnity Compensation (DIC)

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on effective dates of |
| troduction | > adjustment for pension and Parents' DIC, including    |
|            |                                                         |
|            | -   the effective date for Improved Pension and         |
|            |     Parents' DIC, and                                   |
|            |                                                         |
|            | -   payer and recipient verify Department of Veterans   |
|            |     Affairs (VA) information.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > In Improved Pension and Parents' DIC cases, the       |
|  Effective | > effective date of reduction or termination is the     |
|  Date: Imp | > first of the month following the month the income was |
| roved Pens | > first received.                                       |
| ion and Pa | >                                                       |
| rents' DIC | > In the notice of proposed adverse action, ask the     |
|            | > beneficiary to furnish VA with the date income was    |
|            | > first received.                                       |
|            | >                                                       |
|            | > ***Note***: If the income payer or income recipient   |
|            | > does not furnish the specific date that the income    |
|            | > was first paid, but shows the calendar year it was    |
|            | > paid, assume that it was received in January and      |
|            | > propose to adjust effective February 1.               |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### b. P | > If both the payer and the income recipient respond    |
| ayer and R | > within the 60-day waiting period verifying the        |
| ecipient V | > information VA received from the match, send a notice |
| erify VA I | > of proposed adverse action based on the income        |
| nformation | > recipient's report.                                   |
|            | >                                                       |
|            | > ***Note***: If there is only one income year, there   |
|            | > is no need to mention the reply from the payer.       |
+------------+---------------------------------------------------------+

####   {#section-6 .unnumbered}

#### 8. Differing Responses From Payer and Recipient

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on differing          |
| troduction | > responses from payer and recipient, including         |
|            |                                                         |
|            | -   differing response procedures, and                  |
|            |                                                         |
|            | -   an example of handling differing responses.         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > Use the table below to determine what to do when you  |
|  Differing | > receive differing responses from the payer and the    |
|  Response  | > recipient.                                            |
| Procedures | >                                                       |
|            | > ***Reference***: For more information on the efforts  |
|            | > to clarify disputed amounts, see M21-1MR, Part X,     |
|            | > 10.2.                                                 |
+------------+---------------------------------------------------------+

+----------------------------------+-----------------------------------+
| If ...                           | Then ...                          |
+----------------------------------+-----------------------------------+
| the income recipient verifies    | send a notice of proposed adverse |
| more income than                 | action based on the recipient     |
|                                  | verified amount.                  |
| -   the match amount, or         |                                   |
|                                  |                                   |
| -   the amount verified by the   |                                   |
|     payer                        |                                   |
+----------------------------------+-----------------------------------+
| the income recipient reports     | send a notice of proposed adverse |
|                                  | action based on the recipient's   |
| -   less income than the income  | report.                           |
|     payer reports, and           |                                   |
|                                  |                                   |
| -   the recipient's report would |                                   |
|     result in the termination of |                                   |
|     benefits                     |                                   |
+----------------------------------+-----------------------------------+
| -   the payer verifies the       | send a notice of proposed adverse |
|     matched amount, and          | action based on the higher        |
|                                  | verified payer amount.            |
| -   the recipient reports some   |                                   |
|     income, but less than the    | ***Note***: In the notice of      |
|     matched amount               | proposed adverse action, give the |
|                                  | beneficiary the opportunity to    |
|                                  | provide evidence to support the   |
|                                  | claim of lower income.            |
+----------------------------------+-----------------------------------+

Continued on next page

8\. Differing Responses From Payer and Recipient, Continued

  -----------------------------------------------------------------------
  a\. Differing Response Procedures (continued)

  -----------------------------------------------------------------------

+----------------------------------+-----------------------------------+
| If ...                           | Then ...                          |
+----------------------------------+-----------------------------------+
| -   the match amount would       | take action to verify the match   |
|     result in termination of     | amount.                           |
|     benefits, and                |                                   |
|                                  | ***Note***: An administrative     |
| -   both the recipient and payer | subpoena may be used for this     |
|     verify significantly less    | purpose.                          |
|     income that would not result |                                   |
|     in termination (for example, |                                   |
|     the match amount is \$10,000 |                                   |
|     but \$2,000 is verified)     |                                   |
+----------------------------------+-----------------------------------+
| -   the match amount would *not* | -   send a notice of proposed     |
|     result in termination of     |     adverse action based upon the |
|     benefits, and                |     higher payer amount, and      |
|                                  |                                   |
| -   both the recipient and payer | -   provide the beneficiary the   |
|     verify less income than the  |     opportunity to provide        |
|     match amount, and the payer  |     evidence to support the claim |
|     verifies more than the       |     of lower income.              |
|     income recipient             |                                   |
|                                  | ***Payer Report***: Accept the    |
|                                  | payer report as accurate,         |
|                                  | disregarding the difference       |
|                                  | between that amount and the match |
|                                  | amount *unless you have reason to |
|                                  | believe that the payer has        |
|                                  | misreported*. If you have reason  |
|                                  | to believe the payer report is    |
|                                  | inaccurate, take further action   |
|                                  | to verify the match amount.       |
|                                  |                                   |
|                                  | ***Note***: An administrative     |
|                                  | subpoena may be used for this     |
|                                  | purpose.                          |
+----------------------------------+-----------------------------------+

Continued on next page

8\. Differing Responses From Payer and Recipient, Continued

+------------+---------------------------------------------------------+
| #####      | > ***Situation***:                                      |
| b. Example |                                                         |
| : Handling | -   The match amount shows that the veteran received    |
|  Differing |     \$5,000 earnings from the XYZ Company during 2007.  |
|  Responses |                                                         |
|            | -   The XYZ Company verifies \$4,000.                   |
|            |                                                         |
|            | -   The veteran verifies \$3,000.                       |
|            |                                                         |
|            | > ***Result***:                                         |
|            |                                                         |
|            | -   Disregard the difference between \$4,000 and        |
|            |     \$5,000 and send a notice of proposed adverse       |
|            |     action based on \$4,000.                            |
|            |                                                         |
|            | -   Provide the beneficiary the opportunity to provide  |
|            |     evidence to support the claim of lower income.      |
|            |                                                         |
|            | -   Finalize action based on the \$4,000 figure, if no  |
|            |     additional evidence is received at the end of the   |
|            |     adverse action proposal period.                     |
|            |                                                         |
|            | ***Exception***: If XYZ Company has consistently        |
|            | understated earnings previously, take further action to |
|            | verify the match amount.                                |
|            |                                                         |
|            | > ***Note***: An administrative subpoena may be used to |
|            | > resolve this discrepancy.                             |
+------------+---------------------------------------------------------+

####   {#section-7 .unnumbered}

#### 9. Income Payer Response Only -- Other Than Unearned Income From an FI 

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### a.   | > When the income payer responds, but the recipient     |
|  Payer's R | > does not respond to earned income match query, send a |
| eport Only | > notice of proposed adverse action based on the        |
|            | > payer's report.                                       |
|            | >                                                       |
|            | > Take further action to verify the match amount if you |
|            | > have good reason to believe the payer's report is     |
|            | > inaccurate. An administrative subpoena may be used    |
|            | > for this purpose.                                     |
|            | >                                                       |
|            | > ***Reference***: For more information on the efforts  |
|            | > to clarify disputed amounts, see M21-1MR, Part X,     |
|            | > 10.2.                                                 |
+------------+---------------------------------------------------------+

#### 10. Income Recipient Response Only -- Other Than Unearned Income From an FI

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Use the guidelines in the table below when the income |
| a. Respons |                                                         |
| e to Earne | -   recipient responds, but                             |
| d Income M |                                                         |
| atch Query | -   payer does not respond to earned income match       |
|            |     query.                                              |
+------------+---------------------------------------------------------+

+-------------------------------+--------------------------------------+
| If the income recipient ...   | Then ...                             |
+-------------------------------+--------------------------------------+
| -   confirms the match data   | send a notice of proposed adverse    |
|                               | action based on the income           |
| -   reports a lesser amount   | recipient's report.                  |
|     that would terminate      |                                      |
|     benefits, or              |                                      |
|                               |                                      |
| -   reports more income than  |                                      |
|     was disclosed by the      |                                      |
|     match                     |                                      |
+-------------------------------+--------------------------------------+
| -   reports less income than  | take further action to verify the    |
|     the match data, and       | match amount.                        |
|                               |                                      |
| -   the reported amount will  | ***Note***: An administrative        |
|     not terminate benefits    | subpoena may be issued to the payer. |
+-------------------------------+--------------------------------------+
| -   denies receipt of the     | -   notify the beneficiary that      |
|     income, and               |     benefits will not be adjusted    |
|                               |                                      |
| -   furnishes proof showing   | -   PCLR EP 154 and dispose of the   |
|     tax return information is |     worksheet, and                   |
|     incorrect (for example,   |                                      |
|     incorrect SSN)            | -   annotate the file copy of the    |
|                               |     notification letter to show the  |
|                               |     EP 154 was taken and the current |
|                               |     date.                            |
+-------------------------------+--------------------------------------+

Continued on next page

10\. Income Recipient Response Only -- Other Than Unearned Income From
an FI, Continued

  -----------------------------------------------------------------------
  a\. Response to Earned Income Match Query (continued)

  -----------------------------------------------------------------------

+-------------------------------+--------------------------------------+
| If the income recipient ...   | Then ...                             |
+-------------------------------+--------------------------------------+
| -   denies receipt of the     | use all available means to obtain    |
|     income, and               | verification from either the income  |
|                               | payer or the income recipient.       |
| -   does not furnish proof to |                                      |
|     show the report is        | ***Note***: An administrative        |
|     incorrect                 | subpoena to the payer may be used.   |
|                               |                                      |
|                               | ***Reference***: For more            |
|                               | information on the efforts to        |
|                               | clarify disputed amounts, see        |
|                               | M21-1MR, Part X, 10.2.               |
+-------------------------------+--------------------------------------+

####   {#section-8 .unnumbered}

#### 11. No Response From Payer or Recipient Within 60-Day Period 

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on handling no        |
| troduction | > response from payer or recipient within the 60-day    |
|            | > period for other than unearned income from an FI,     |
|            | > including when                                        |
|            |                                                         |
|            | -   to take adverse action                              |
|            |                                                         |
|            | -   the payer will not furnish the information          |
|            |                                                         |
|            | -   the verification process complete, and              |
|            |                                                         |
|            | -   the beneficiary responds.                           |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Do not take adverse action until a reasonable income  |
| a. When to | > verification process is completed.                    |
|  Take Adve | >                                                       |
| rse Action | > If VA has made a good faith effort with *no response* |
|            | > from payer or recipient, the verification process is  |
|            | > considered completed under the conditions described   |
|            | > in the table below.                                   |
+------------+---------------------------------------------------------+

+-----------------------------+---+----------------------------------------+
| When ...                    |   | Then the verification process is       |
|                             |   | complete when ...                      |
+-----------------------------+---+----------------------------------------+
| the income recipient is not |   | -   a verification letter is sent to   |
| the beneficiary             |   |     the recipient *or* to each of the  |
|                             |   |     recipient\'s income payers, and    |
|                             |   |                                        |
|                             |   | -   the 60-day response period has     |
|                             |   |     expired.                           |
+-----------------------------+---+----------------------------------------+
| the income recipient is the |   | -   a verification letter is sent to   |
| beneficiary                 |   |     each of the recipient's income     |
|                             |   |     payers, and                        |
|                             |   |                                        |
|                             |   | -   the 60-day response period has     |
|                             |   |     expired.                           |
|                             |   |                                        |
|                             |   | ***Note***: Sending a verification     |
|                             |   | letter only to the beneficiary does    |
|                             |   | not meet the reasonable income         |
|                             |   | verification criteria.                 |
+-----------------------------+---+----------------------------------------+
| both the beneficiary and    | - |                                        |
| his or her spouse are       |   |                                        |
| income recipients           |   |                                        |
|                             |   |                                        |
|                             | a |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             | v |                                        |
|                             | e |                                        |
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|                             | t |                                        |
|                             | i |                                        |
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|                             | n |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             | l |                                        |
|                             | e |                                        |
|                             | t |                                        |
|                             | t |                                        |
|                             | e |                                        |
|                             | r |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             |   |                                        |
|                             |   |                                        |
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|                             | s |                                        |
|                             |   |                                        |
|                             |   |                                        |
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|                             | ' |                                        |
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|                             | r |                                        |
|                             | s |                                        |
|                             | , |                                        |
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|                             | d |                                        |
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|                             | d |                                        |
|                             | . |                                        |
+-----------------------------+---+----------------------------------------+

Continued on next page

11\. No Response From Payer or Recipient Within 60-Day Period, Continued

+------------+---------------------------------------------------------+
| ##### b    | > If a response is received that indicates that the     |
| . Payer Wi | > payer will not furnish the information, take further  |
| ll Not Fur | > action to verify the match amount. An administrative  |
| nish the I | > subpoena may be necessary.                            |
| nformation |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### c.   | > Once the verification process is complete             |
|  Verificat |                                                         |
| ion Proces | -   send a notice of proposed adverse action based on   |
| s Complete |     the match amount, giving the beneficiary an         |
|            |     opportunity to provide evidence to show that the    |
|            |     information is incorrect, and                       |
|            |                                                         |
|            | -   inform the beneficiary that if no evidence is       |
|            |     furnished to challenge this income information, VA  |
|            |     will adjust or terminate benefits as indicated.     |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d.   | > Use the table below to determine what action to take  |
| Beneficiar | > once the beneficiary responds.                        |
| y Responds |                                                         |
+------------+---------------------------------------------------------+

+----------------------------------+-----------------------------------+
| If the beneficiary reports a ... | Then ...                          |
+----------------------------------+-----------------------------------+
| lower level of income with       | take award action based on the    |
| acceptable supporting evidence   | beneficiary\'s evidence.          |
| or confirms the match income     |                                   |
+----------------------------------+-----------------------------------+
| lower level of income that       | take award action based on the    |
| results in termination of        | beneficiary's report.             |
| benefits                         |                                   |
+----------------------------------+-----------------------------------+
| -   lower level of income not    | take further action to verify the |
|     resulting in termination,    | match amount.                     |
|     and                          |                                   |
|                                  | ***Note***: An administrative     |
| -   does not provide supporting  | subpoena issued to the payer may  |
|     evidence                     | be used for this purpose.         |
+----------------------------------+-----------------------------------+
| higher level of income           | -   send another notice of        |
|                                  |     proposed adverse action based |
|                                  |     on this higher amount, and    |
|                                  |                                   |
|                                  | -   defer award action until the  |
|                                  |     60-day due process period for |
|                                  |     the second notice of proposed |
|                                  |     adverse action has expired.   |
+----------------------------------+-----------------------------------+

####   {#section-9 .unnumbered}

#### 12. Considering Earnings in Individual Unemployability (IU) and Pension Cases

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains information on considering        |
| troduction | > earnings in IU and pension cases, including           |
|            |                                                         |
|            | -   referral of IU cases to regional offices (ROs)      |
|            |                                                         |
|            | -   verification of earnings in IU cases                |
|            |                                                         |
|            | -   referral of IU cases to the rating activity         |
|            |                                                         |
|            | -   determining the need for an examination in IU cases |
|            |                                                         |
|            | -   a rating proposal to reduce benefits in IU cases    |
|            |                                                         |
|            | -   considering protected service-connected (SC)        |
|            |     evaluations                                         |
|            |                                                         |
|            | -   referral of a pension case for a permanent and      |
|            |     total (PT) determination, and                       |
|            |                                                         |
|            | -   when the pension is terminated without a referral   |
|            |     to the rating activity.                             |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > Only IU cases with earned income over the current     |
| a. Referra | > poverty threshold are referred to ROs.                |
| l of IU Ca | >                                                       |
| ses to ROs | > ***Note***: Amounts received from participation in    |
|            | > VHA's CWT Program are not considered income for IU    |
|            | > purposes.                                             |
|            | >                                                       |
|            | > ***Reference***: For more information on the poverty  |
|            | > threshold, see M21-1MR, Part IV, Subpart ii, 2.F.32.  |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > If, after initial review, verification of earnings    |
|  b. Verifi | > from employment is needed in an IU case, see the      |
| cation of  | > references listed below.                              |
| Earnings i | >                                                       |
| n IU Cases | > ***References***: For more information on             |
|            |                                                         |
|            | -   initial reviews, see M21-1MR, Part X, 9.6           |
|            |                                                         |
|            | -   verifying earnings from employment, see M21-1MR,    |
|            |     Part X, 9.7 through 9.12.                           |
+------------+---------------------------------------------------------+

Continued on next page

12\. Considering Earnings in Individual Unemployability (IU) and Pension
Cases, Continued

+------------+---------------------------------------------------------+
| ##### c.   | > When verification is received, or after 60 days if no |
|  Referral  | > response from payer or veteran, refer the IU case to  |
| of IU Case | > the rating activity at the RO of jurisdiction to      |
| s to Ratin | > determine the need for a physical examination.        |
| g Activity |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### d. D | > To determine the need for an examination in an IU     |
| etermining | > case, the rating activity shall review the            |
|  the Need  | > information submitted by the veteran and/or the       |
| for an Exa | > veteran\'s employer. If past employment               |
| mination i | > questionnaires, *VA Form 21-4140*, indicate the       |
| n IU Cases | > veteran reported the earnings and VA failed to take   |
|            | > action, it is an administrative error.                |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| #####      | > After all evidence has been reviewed, the rating      |
|  e. Rating | > activity shall prepare a rating proposing to reduce   |
|  Proposal  | > benefits and refer the IU case to the authorization   |
| to Reduce  | > activity. If the rating activity proposes to reduce   |
| Benefits i | > benefits, follow the provisions of M21-1MR, Part I,   |
| n IU Cases | > 2.B.                                                  |
|            | >                                                       |
|            | > ***Reference***: For more information on handling     |
|            | > fraud, see M21-1MR, Part III, Subpart vi, 5.A.        |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### f    | > Use the table below to determine when                 |
| . Consider | > service-connected (SC) evaluations are protected in   |
| ing Protec | > IU cases.                                             |
| ted SC Eva | >                                                       |
| luations i | > ***Reference***: For more information on protected    |
| n IU Cases | > evaluations, see [38 CFR                              |
|            | > 3.951](http://w                                       |
|            | ww.warms.vba.va.gov/regs/38CFR/BOOKB/PART3/S3_950.DOC). |
+------------+---------------------------------------------------------+

+--------------------------+-------------------------------------------+
| If earnings began ...    | Then ...                                  |
+--------------------------+-------------------------------------------+
| after protection         | take no further action.                   |
+--------------------------+-------------------------------------------+
| before protection        | complete development is required because  |
|                          | benefits are subject to reduction if      |
|                          | continuation of the rating is based on    |
|                          | fraud or sustained improvement in the SC  |
|                          | disability.                               |
|                          |                                           |
|                          | ***Reference***: For more information on  |
|                          | fraud, see [38 CFR                        |
|                          | 3.1(aa)(2)](http://vbaw.vba.v             |
|                          | a.gov/bl/21/publicat/Regs/Part3/3_1.htm). |
+--------------------------+-------------------------------------------+

Continued on next page

12\. Considering Earnings in Individual Unemployability (IU) and Pension
Cases, Continued

+------------+---------------------------------------------------------+
| ##### g    | > PMC employees have the discretion to decide whether   |
| . Referral | > or not to refer a pension case, in which earned       |
|  of a Pens | > income is established, to the rating activity at the  |
| ion Case f | > RO of jurisdiction for a determination of continued   |
| or PT Dete | > permanent and total (PT) disability status.           |
| rmination  |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### h    | > If pension is terminated for earned income and the    |
| . Pension  | > case is not referred to the rating activity, flash    |
| Terminated | > the claims folder for referral in case the veteran    |
|  Without R | > files a reopened claim.                               |
| eferral to |                                                         |
|  the Ratin |                                                         |
| g Activity |                                                         |
+------------+---------------------------------------------------------+

#### 13. Exhibit 1: Sample IVM Sheet

+------------+---------------------------------------------------------+
| ##### In   | > This topic contains a sample IVM sheet.               |
| troduction |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##### C    | > February 5, 2008                                      |
| hange Date |                                                         |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| ##         |                                                         |
| ### a. Sam |                                                         |
| ple IVM Sh |                                                         |
| eet Page 1 |                                                         |
+------------+---------------------------------------------------------+

+-----------------------------------------------------------------------+
| C-NUMBER: SSN: STUB NAME:                                             |
|                                                                       |
| ENTITLEMENT CODE: RECIPIENT CODE: VARO NUMBER:                        |
|                                                                       |
| INCOME RECIPIENT\'S NAME AND ADDRESS:                                 |
|                                                                       |
| 2007 EARNED INCOME                                                    |
|                                                                       |
| EMPLOYER NAME AND ADDRESS EMPLOYEE SSN GROSS WAGES                    |
|                                                                       |
| TOTAL WAGES:                                                          |
|                                                                       |
| 2007 UNEARNED INCOME                                                  |
|                                                                       |
| PAYER NAME AND ADDRESS RECIPIENT SSN GROSS INCOME                     |
+-----------------------------------------------------------------------+

Continued on next page

13\. Exhibit 1: Sample IVM Sheet, Continued

+------------+---------------------------------------------------------+
| ##         |                                                         |
| ### b. Sam |                                                         |
| ple IVM Sh |                                                         |
| eet Page 2 |                                                         |
+------------+---------------------------------------------------------+

+-----------------------------------------------------------------------+
| TOTAL UNEARNED:                                                       |
|                                                                       |
| 2007 RETIREMENT INCOME                                                |
|                                                                       |
| PAYER NAME AND ADDRESS RECIPIENT SSN GROSS INCOME                     |
|                                                                       |
| TOTAL RETIREMENT:                                                     |
|                                                                       |
| TOTAL INCOME:                                                         |
+-----------------------------------------------------------------------+