Opinion
Case No. 03-CV-4690.
July 7, 2004
YOUSSEF GAD, Pro Se, Brooklyn, NY, For the Plaintiff.
ROSLYNN R. MAUSKOPF, ESQ., United States Attorney, Eastern District of New York, SOM RAMRUP, ESQ., Special Assistant United States Attorney, Brooklyn, New York, For the Defendant.
MEMORANDUM AND ORDER
Pro se plaintiff Youssef Gad ("Gad") seeks review of the final decision of the Commissioner of Social Security ("Commissioner") denying his application for retirement benefits. The Commissioner moves for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure because, she contends, Gad has not accumulated the requisite forty quarters of coverage. For the reasons set forth below, the Court affirms the denial of benefits.
I.
The Administrative Record ("AR") discloses that Gad was born in 1935 and emigrated to the United States from Egypt in 1978. On November 17, 2000, about five weeks before his sixty-fifth birthday, Gad filed a claim for retirement benefits.During the pendency of his application, Gad discovered that the Social Security Administration ("SSA") had no earnings records for him during the 1990 — 1994 period; accordingly, pursuant to 20 CFR § 404.820, he sought to correct his SSA records to reflect income he claimed he had earned during those years. During a hearing before an Administrative Law Judge ("ALJ") on April 24, 2002, Gad, appearing pro se, testified that although he was a certified public accountant in Egypt, in the United States he had difficulty finding work, other than intermittent menial jobs, until 1995, when he became a bookkeeper at his son's business. Gad testified that between 1990 and 1994 he worked variously as a dish washer, gas station attendant and maintenance man, earning $3,876 in 1990, $3,663 in 1991, $3,739 in 1992, $4,237 in 1993 and $4,818 in 1994; during this time, his employers paid him in cash and did not give him any written payroll records. The ALJ did not inquire as to, and Gad did not disclose, the names of his employers or the amounts he earned from each employer during each tax year.
Gad filed self-employed income tax returns for the 1990-1994 tax years, but not until late 1998. He testified that he believed that he was not required to file earlier because he had not earned enough money during those years. He further testified that he filed the tax returns after speaking to an American accountant in 1998 who "explained to me that I had made a mistake" by not previously filing. AR at 100. In support of his testimony that he had worked between 1990 and 1994, Gad provided the ALJ with statements he had received from the IRS for each of the five years in question; each statement acknowledged that Gad had filed a belated return, listed his adjusted gross income, set forth the amount of Gad's self-employment tax (which ranged from $593 in the 1990 tax year to $737 for 1994), late fees, and penalties, and listed the dates that Gad had made payments on the amounts he owed. Gad also submitted copies of his cancelled checks to the Treasury Department representing those payments. Gad did not, however, submit copies of the tax returns.
The ALJ credited Gad for the 1990-1994 period and awarded benefits. Initially observing that different evidentiary rules apply to employees than to the self-employed for purposes of eligibility for retirement benefits, the ALJ noted that Gad's testimony established that from 1990 through 1994 he was an employee, not self-employed; that Gad had erroneously filed his returns as a self-employed individual; that he should have filed his returns as an employee; and that under the circumstances, Gad should be treated as an employee (rather than as self-employed) for purposes of his eligibility.
The ALJ next acknowledged that, as an employee, Gad faced a statutory presumption that he had not earned income during the time at issue because he had not timely sought to correct his SSA wage records. See 42 U.S.C. § 405(c)(4)(B) (with respect to a wage earner who, more than three years, three months, and fifteen days after the last day of the period at issue, seeks to correct omissions of SSA records, the absence of such records "shall be presumptive evidence . . . that no such alleged wages were paid to such individual in such period"). Crediting Gad's testimony concerning his 1990-1994 work experience, the ALJ noted that Gad's employers "did not comply with their legal obligations to provide Social Security coverage," that as a "lower level" immigrant employee who had difficulty securing work, Gad "was not in any position to force them to do so[,]" and that, as a result, Gad "received no evidence of his employment from his employer." AR at 16.
Although Gad's evidence consisted of his testimony, the IRS statements, and his cancelled checks, the ALJ stated that Gad's "own careful records for the period indicate that Gad earned" wages between 1990 and 1994. The ALJ concluded that because "preferred documentation of the earnings is not available[,] . . . the claimant's allegations, credible and detailed, have been accepted[,]" and that Gad had overcome the presumption that he had not earned wages. Id. After crediting Gad with the additional quarters, the ALJ determined that Gad was entitled to retirement benefits.
On June 23, 2002, the Appeals Council sent Gad a Notice of Review. See 20 CFR § 404.973 (requiring issuance of Notice of Review "[w]hen the Appeals Council decides to review a case"). The Notice of Review stated that the Appeals Council, on its own motion, had elected to review the ALJ's determination. Like the ALJ, the Appeals Council treated Gad as an employee, explaining in straightforward terms that Gad faced a presumption that he had not earned wages during 1990-1994. See AR at 90-92 (Notice of Review) (citing 42 U.S.C. § 405 (c)(4)(B)). The Notice of Review explained to Gad precisely why the evidence supporting his claim was insufficient and how Gad could submit additional information:
[T]he evidence needed to overcome the statutory presumption that no wages were paid and to prove alleged wages must be substantial and of probative value and must clearly establish both the amount of wages paid and the time of such payment . . . a self-serving declaration is insufficient to establish the alleged wages.
You contend that you worked as a dishwasher, gas station attendant and maintenance worker for employers who illegally did not provide Social Security coverage. However, the record does not contain evidence or information regarding the identity of the employers and does not establish either the amount of wages alleged to have been paid to you by each employer or the periods that you worked for each employer. Therefore, the Appeals Council proposes to find that evidence needed to overcome the statutory presumption that no wages were paid to you in the years 1990 through 1994 is not present, that wages may not be credited to you for the years 1990 through 1994 in the absence of additional evidence, and that you do not have enough quarters of coverage to meet the fully insured status requirement for entitlement to old-age insurance benefits.
Additional evidence or a further written statement as to the facts and/or law should be submitted by mail to the Appeals Council within 30 days from the date of this letter.Id. at 91. See 20 CFR § 404.976(b)(2) (authorizing Appeals Council to remand for additional factfinding or, alternatively, "if the Appeals Council determines that it can obtain the evidence more quickly, it may do so"). The Notice of Review concluded by stressing that "[i]f the Appeals Council receives no response to this notice within 30 days, it will assume that . . . no additional evidence or argument will be submitted." Id. at 92.
Gad did not reply. On August 21, 2002, the Appeals Council reversed the ALJ's grant of benefits, constituting the final decision of the Commissioner. It ruled that it was "constrained" to conclude that the ALJ had committed an error of law in awarding Gad benefits. Id. at 7. The Appeals Council stated that Gad "has provided no written evidence" of his earnings during the period at issue, that "there is no corroborative proof that the claimant was an employee or regarding for whom he worked and the amount of his earnings[,]" and that "the record does not contain any evidence or information regarding the identity of his employers." Id. at 6-7. Excluding the 1990-1994 period, the Appeals Council calculated that Gad had accumulated only thirty-five of the forty quarters necessary for eligibility; consequently, it denied his claim. Gad has not claimed that he did not receive the Notice of Review.
II.
At issue is the propriety of the Appeals Council's determination that Gad had not surmounted the statutory presumption that he had not earned wages between 1990 and 1994. "The presumption `protects the government from spurious or merely inaccurate or unverifiable claims based on after-the-fact evidence.'" Butts v. Sec'y of Health Human Services, 706 F.2d 107, 108 (2d Cir. 1983) (citation omitted). "The presumption may be rebutted, however, for example to . . . conform the Secretary's records to `tax returns or portions thereof (including information returns and other written statements) filed with the Commissioner of Internal Revenue[.]'" Id. (citing 42 U.S.C. § 405(c)(5)(F)(i)).
The Court initially observes that the Appeals Council afforded Gad two distinct advantages. First, notwithstanding Gad's 1990-1994 tax returns showing self-employed income, the Appeals Council treated Gad as an employee rather than as a self-employed individual. This treatment is significant. When an employee seeks to use a tax return to correct an omission in his or her SSA records more than three years, three months, and fifteen days after the last day or the time period at issue, SSA regulations provide that "[the Secretary] will correct SSA returns to agree with a tax return of wages . . . to the extent that the amount of earnings shown in the return is correct." 20 CFR § 404.822(b). See also 42 U.S.C. 405(c)(5)(F)(i) (authorizing Secretary "to conform his records to tax returns or portions thereof (including information returns and other written statements)"). The self-employed, in contrast, do not share the privilege, because by statute, the absence of records for self-employed individuals seeking to correct omissions in their SSA records more than three years, three months, and fifteen days after the last day of the period at issue "shall be conclusive . . . that no such alleged self-employment income was derived[.]" 42 U.S.C. § 405(c)(4)(C).
The Second Circuit has explained that the difference in treatment between employees and the self-employed is attributable to the different mechanisms whereby each reports income: "Because self-employed workers control the reporting of their income without the check of employers' also reporting their wages to IRS, Congress saw fit to impose a stricter standard for amendment of their SSA records." Hollman v. Dep't of Health Human Services, 696 F.2d 13, 17 (2d Cir. 1982). Because from all appearances it appears that Gad earned income in 1990-1994 as an employee, rather than as a self-employed individual, the Court agrees with the Appeals Council's favorable treatment of Gad as an employee and will do likewise.
Second, in addition to treating Gad as an employee, the Appeals Council painstakingly explained why Gad's self-serving evidence was insufficient and what Gad could do about it. Gad elected not to respond. In seeking additional evidence from Gad, who was the sole source of the pertinent information, the Appeals Council satisfied its obligation to develop the record. See Shaw v. Chater, 221 F.3d 126, 131 (2d Cir. 2000) (noting the "obligation to develop the record in light of the non-adversarial nature of the benefits proceedings, regardless of whether the claimant is represented by counsel."); Sharbaugh v. Apfel, 2000 WL 575632 at *3 (W.D.N.Y. March 20, 2000) ("where the record before the Appeals Council is ambiguous or incomplete, the Appeals Council has an affirmative obligation to develop it further"). Gad, however, refused to cooperate in the development of the record.
In according no weight to the self-serving evidence Gad presented to the ALJ, the Appeals Council acted consistently with the case law, which requires retirement claimants to provide corroborative evidence of their alleged employment. See, e.g., Butts, 706 F.2d at 108 (noting that employee who asserted that SSA records were erroneous "did not, however, produce copies of his income tax records and W-2 forms for the years in question"); Breeden v. Weinberger, 493 F.2d 1002 (4th Cir. 1974) (claimant provided affidavits and testimony from friends and former co-workers); Kephart v. Richardson, 505 F.2d 1085 (3rd Cir. 1974) (claimant submitted affidavits from acquaintances and testimony from former employer).
The Appeals Council's decision was also consistent with SSA Social Security Ruling ("SSR") 87-17, which specifies two types of corroborative evidence that the SSA will consider when employees seek to correct omissions in their SSA records: "preferred evidence" and "secondary evidence." SSRs are "agency rulings `published under the authority of the Commissioner of Social Security and are binding on all components of the Administration[,]'" Sullivan v. Zebley, 493 U.S. 521, 531 n. 9 (1990) (citing 20 CFR § 422.408 (1989)), and on the courts. See Frezza v. Barnhart, 2002 WL 31102625, *7 (E.D.N.Y. 2002) ("the rule that Social Security regulations are binding on the courts also applies to Social Security Rulings") (citing 2 Harvey L. McCormick. Social Security Claims and Procedures, 504 n. 1 (5th ed. 1998)).
According to SSR 87-17, "preferred evidence" is evidence that is "sufficient to raise a reasonable doubt about the correctness of the individual's earnings record"; it consists of items such as W-2 forms and "statements signed by the employer or signed by the custodian of the employer's records[.]" SSR 87-17 at 1. W-2 forms, in which the employer provides information such as the employer's identification number, the employee's wages, and the amount of taxes withheld, are "preferred evidence" because they independently support the claimant's assertion of employment. See Butts, 706 F.2d at 108 (noting absence of corroborating W-2s); Guadagno v. Wallack Ader Levithan Associates, 932 F.Supp. 94, 97 (S.D.N.Y. 1996) (noting corroborative use of W-2s).
SSR 87-17 explains that "[i]f the individual provides a reasonable explanation as to why preferred evidence is not available, then . . . secondary evidence may be provided." "Secondary evidence" includes "[a]n individual's copy of Federal, State, or local income tax returns." Id. Secondary evidence is "considered . . . of high probative value[,]" but if such evidence "is also unavailable, the individual should provide a reasonable explanation of why it is not available. He or she should include, in that case, any evidence that can be produced (for example: personal records or account books; signed statements of coworkers or others who have first-hand knowledge about the wages paid or the self-employment income received)." Id.
Gad provided a reasonable explanation as to why he did not have a W-2: his employers disobeyed the social security laws and Gad had little or no power to compel compliance. However, employees who cannot obtain W-2s are required to file a completed IRS Form 4852 with the employee's annual tax return. In Form 4852, the employee must identify, under oath, the employer and employer's address, estimate the amount of wages earned and taxes withheld, explain how the employee determined those amounts, and relate the employee's attempts to obtain the missing W-2. The information provided in Form 4852 is subject to verification by the IRS. See "What To Do If You Haven't Received A Form W-2", IRS Tax Tip No. 2004-23 (Feb. 4, 2004) at 1 (available at http://www.irs.gov/newsroom/article/0, id=106570.html).
Although Gad explained why he was not given a W-2, he did not undertake the additional step contemplated by SSR 87-17 of providing corroborative evidence such as the names of his employers, statements from any of his co-employees, or his own personal wage records establishing how he determined his yearly income for the 1990-1994 period. This is similar to the information sought in Form 4852. It is more than the Appeals Council requested.
Because Gad did not submit any W-2s, the Court need not decide whether a Form W-2 would constitute conclusive evidence of an employee's wages for the disputed period. See 20 CFR § 404.822(b) ("[the Secretary] will correct SSA returns to agree with a tax return of wages . . . to the extent that the amount of earnings shown in the return is correct."). What is germane is that the Appeals Council appropriately requested corroborative evidence of Gad's employment and that Gad failed to provide any such evidence; consequently, Gad has not established his entitlement to benefits and the Appeals Council's determination was correct as a matter of law.
CONCLUSION
The Commissioner's motion is granted and the complaint is dismissed.
SO ORDERED.