by Joshua on January 11, 2011
In an unanimous decision, the Supreme Court upheld the requirement that medical residents pay Social Security taxes. As we noted in our prior posts on this topic, full-time students that work in addition to attending school are generally exempt from paying such taxes. However, in the Court’s opinion written by Chief Justice Roberts, the interpretation by the Internal Revenue Service of the law requiring residents to pay such tax was a reasonable one. The Court did not agree with Mayo Clinic’s argument that like full-time students, medical residents attend lectures and perform lab work in the course of learning and thus should not be responsible for paying the Social Security tax. The stakes in this case range from upwards of $700 Million payable by approximately 100,000 medical residents across the country.
Court Opinion
Wall Street Journal, Tax on Medical Residents Upheld by Court
by Joshua on March 3, 2010
In recently released IR-2010-25, the IRS states that it has made an administrative determination to accept the position that medical residents are excepted from FICA taxes under the student exception for tax periods ending before April 1, 2005. This period is before the new IRS regulation became effective.
The release also states that the IRS will begin contacting hospitals, universities, and medical residents who filed FICA (Social Security and Medicare tax) refund claims with more information and procedures within 90 days.
Below is a link to the release which has a Question and Answers reference and link to latest regulations.
IR-2010-25, March 2, 2010
by Joshua on June 1, 2010
According to the Associated Press, the Supreme Court will hear an appeal from the Eighth Circuit Court of Appeals on the issue of whether student doctors are students or employees when it comes to collecting Social Security taxes. The case on appeal is Mayo Foundation for Medical Education and Research v. United States, 568 F.3d 675 (8th Cir. 2009). Argument is set to take place in fall or winter and Supreme Court nominee Elena Kagan would not take part in the case if confirmed because she signed the government’s brief defending the IRS’ position.
In a previous post, Medical Resident- A Somebody, Not “Student” Body under FERPA and FICA, I discussed the issues and case law surrounding medical residents and their status’ as students and employees under FERPA (Family Education Rights and Privacy Act) and FICA. Perhaps the Supreme Court’s ruling will provide public university administrators with some guidance on how to characterize residents for purposes of FERPA.
by Joshua on February 18, 2010
I was recently aske
d to write a memorandum answering the question of whether medical residents are students for purposes of the Family Education Rights and Privacy Act (FERPA). FERPA protects the release of a student’s education records without the consent of the student. Under FERPA, the definition of student is broadly defined. However, the Director of the Office of Family Compliance has ruled that medical residents are not students under FERPA because they are employees who have completed their education. During the course of my research, I discovered that this issue was at the forefront in tax law as well and determined that courts addressing the issue of whether a medical resident qualifies for the student exception to FICA taxes may provide reasoning which would be helpful in advocating for a favorable interpretation of FERPA for medical residents.
There is currently a split among the Circuits regarding the FICA student exemption. The Eleventh and Second Circuits have opined that the FICA student exemption applies to medical residents because whether the exemption applies is a question of fact which requires the use of a facts and circumstances analysis to determine whether a particular resident qualifies for the student exemption. See U.S. v. Mt. Sinai Med. Ctr., 486 F.3d 1248 (11th Cir. 2007); U.S. v. Mem’l Sloan-Kettering Cancer Ctr., 563 F.3d 19 (2d Cir. 2009). However, the Eighth Circuit has held that medical residents do not qualify for the FICA student exemption because under the amended Regulations, students who work more than forty hours per week are full-time employees and therefore expressly fail to meet the statutory definition of student. See Mayo Found. v. U.S., 568 F.3d 675 (8th Cir. 2009).
Although medical residents are paid, Congress has intended for students wages to be exempt from FICA taxes. Why should medical residents not be considered as students for purposes of the FICA student exemption?
The Accreditation Counsel for Graduate Medical Education (ACGME) has stated that a medical residency program consists of work and education components. For example, a medical resident at the University of Florida cannot advance in his or her residency program without meeting the program’s educational requirements each term. Therefore, a resident’s advancement in the residency program and subsequent licensing as a doctor hinges on his or her abilities as a student. Graduate assistants who work for a professor and receive compensation in addition to receiving an education are exempt from FICA taxes. However, a medical resident, who is enrolled in a university based residency program and receives continuing education, may not be exempt.
In regards to FICA taxes, Congress has spoken by providing a student exemption to FICA and medical residents who are required to meet academic benchmarks in order to advance in a residency program should be considered students for purposes of FICA.
In an unanimous decision, the Supreme Court upheld the requirement that medical residents pay Social Security taxes. As we noted in our prior posts on this topic, full-time students that work in addition to attending school are generally exempt from paying such taxes. However, in the Court’s opinion written by Chief Justice Roberts, the interpretation by the Internal Revenue Service of the law requiring residents to pay such tax was a reasonable one. The Court did not agree with Mayo Clinic’s argument that like full-time students, medical residents attend lectures and perform lab work in the course of learning and thus should not be responsible for paying the Social Security tax. The stakes in this case range from upwards of $700 Million payable by approximately 100,000 medical residents across the country.
