What You Need to Know About Being “Without Fault” in a Deduction Overpayment, § 404.510

If you receive Social Security benefits, you may be subject to deduction overpayments if you earn above a certain threshold.

However, there are certain circumstances where you may be considered “without fault” in these situations.

According to § 404.510 of the Social Security Administration’s regulations, all pertinent circumstances will be considered in determining whether an individual is “without fault,” including age, intelligence, physical or mental limitations, and any educational or linguistic limitations that the individual has.

Some examples of situations in which an individual will be considered “without fault” include:

• Reasonable belief that only net cash earnings are included in determining the annual or monthly earnings limitation under section 203(f) of the Social Security Act.
• Reliance upon erroneous information from an official source within the Social Security Administration or another governmental agency with respect to the interpretation of a pertinent provision of the Act or regulations pertaining thereto.
• The beneficiary’s death caused the earnings limit applicable to their earnings for purposes of deduction and the charging of excess earnings to be reduced below $1,680 for a taxable year ending after 1967.
• Unawareness that earnings were in excess of the earnings limitation applicable to the imposition of deductions and the charging of excess earnings.

Other examples include reasonable beliefs about how earnings are determined, lack of knowledge about certain payment types being considered earnings, and failure to understand the deduction provisions of the Act.

Here’s an example of a situation in which an individual may be considered “without fault” in a deduction overpayment:

Let’s say that John, who receives Social Security benefits, works part-time at a local store. He is aware that there is an earnings limit, but he is unsure of how it is calculated. In a given month, John works more hours than usual and earns more than the monthly earnings limit. However, he is not aware that his total earnings for the month exceed the limit and he does not report it to the Social Security Administration. As a result, John receives a payment that is higher than what he should have received.

In this scenario, John may be considered “without fault” in the deduction overpayment because he had a reasonable belief that only his net cash earnings were included in determining the monthly earnings limit. Since he did not knowingly violate the earnings limit and was not aware that his earnings exceeded the limit, he may not be required to pay back the overpayment. However, it would ultimately be up to the Social Security Administration to determine whether John meets the criteria for being “without fault” in this situation.

It is important to note that while these situations may result in an individual being considered “without fault,” it is ultimately up to the Social Security Administration to determine whether or not an individual meets the criteria. If you believe you may be “without fault” in a deduction overpayment situation, it is recommended that you contact the Social Security Administration for further guidance.

https://www.ssa.gov/OP_Home/cfr20/404/404-0510.htm