Mayo Clinic Doctors Versus Students

[Bjorn]

Mayo clinic tried to get back the FICA tax on residents saying they were students not employees. The IRS gave back the FICA after a long fight.

I have another resident NOT at Mayo and this small teaching hospital did not fight the IRS. Right now she is on a normal w2 with FICA withholding. Does anybody think we could get back the 941 tax by attaching the Mayo clinic fight paperwork and file a form 843?

This feels like it is pushing the envelope.

Mahalo.

Bjorn

[S T]

Seems still unsettled

Seems like the FICA debate is still ongoing. After the Mayo Clinic (2003 case) refund, IRS filed suit in 2005 on several other teaching hospitals for repayment of FICA which still seem to be unresolved.

There has been an exception for FICA for students if a two-part test is met: (1) the employer must be a school, college or university; and (2) the employee must be a student who is enrolled in, and regularly attends classes, at that school, college, or university.

Final regulations for services performed on or after April 1, 2005, the IRS replaced Revenue Procedure 98-16 with Revenue Procedure 2005-11, 2005-2 I.R.B. 307,

An employer is considered a “school, college or university” if the primary function is to carry on educational activities. An employee is considered a “student” for purposes of the student exceptions from FICA taxes and the FUTA tax. only where education is the primary function of the organization, and the individual’s primary relationship with the school, college or university is a student rather than an employee The student must be regularly attending classes in pursuit of an education credential.
An example:

a teaching hospital that is an unincorporated division of a university would be treated as a school, college or university because the university’s primary function is education. However, a separate teaching hospital that has a division or function that carries on educational activities would not qualify because its primary function is health care.

If your t/p is a
'resident," I would not think based on the above that they would qualify to be exempt from the Fica/Mcare tax.

Here is some more info http://www.ama-assn.org/amednews/site/free/prsb0822.htm

http://www.siumed.edu/resaffairs/Residencyintranet/Documents/FICA_ruling_update_1-2005.doc

http://pwchealth.com/pdf/fica.pdf

http://www.irs.gov/pub/irs-tege/p4090_0605_text.pdf#search=%222005%20update%20fica%20and%20medical%20residents%22

There are some references in the IRS final determination in 2005 that have to be met.

Sandy