Medical residents are excepted from FICA (Federal Insurance Contributions Act) taxes based on the student exception for tax periods ending before April 1, 2005, when new regulations became effective, says the Internal Revenue Service (IRS). Based on this March 2 administrative determination, the IRS will spend the next 90 days contacting hospitals, universities and medical residents who filed FICA refund claims for these periods to provide information about how to obtain refunds. "Employers and individuals with pending claims do not need to take any action at this time," says the IRS.
FICA taxes include both Social Security and Medicare taxes. Employers withhold and pay both the employer share and their employees' share of FICA taxes. Hospitals, medical schools and medical residents began filing FICA refund claims in the 1990s, claiming that medical residents qualified for a student exception under Internal Revenue Code section 3121(b)(10). Employer FICA refund claims were for both the employer share and the employee share of the FICA tax.
A dispute about the applicability of the student FICA exception led the IRS to hold these claims in suspense. That dispute is resolved with this administrative determination. Hospitals and medical schools that employed medical residents, as well as individual medical residents, are eligible for refunds if they are covered by timely filed FICA refund claims. These refund claims must meet the same requirements that apply to all FICA refund claims, including verification by the IRS of the claim amount and payment of interest.
- see the IRS press release