Q:Why are FICA refunds being paid to medical residents and their employers?
A: Employers (typically hospitals and medical schools) and individual taxpayers (medical residents) began filing FICA refund claims in the late 1990s, based on the position that medical residents are students and therefore eligible for the FICA tax exception under Internal Revenue Code section 312 1(b)(10). This is referred to as the student exception and may apply to students at a school, college or university who is also an employee of that school, college or university. The employer’s FICA refund claims were for both the employer share and the employee share of the FICA tax. In some cases, individual medical residents filed their own claim for the employee share of the FICA tax. The IRS held the claims in suspense because there was a dispute as to whether the student FICA exception applied. The IRS has made an administrative decision in March 2010 to accept the position that medical residents are excepted from FICA taxes for the periods ending before April 1, 2005, when new IRS regulations went into effect.
Q: Who is eligible to receive a refund?
A: Institutions that employed medical residents and individual medical residents are eligible to receive refunds if they are covered by timely filed FICA refund claims. Institutions, like the hospital, are covered under FICA refund claims they filed themselves. Individual medical residents can be covered under FICA refund claims they filed themselves or under the claims filed by the institutions/hospital that employed them. These refund claims are subject to the same requirements that apply to all FICA refund claims including verification by the IRS of the amount of the claim and the payment of any applicable interest.
- The hospital filed protective claims for the years 2001 through the quarter ending March 31, 2005. If you were a medical resident at the hospital between that time period and had FICA taxes withheld, you would be covered under the protective claims filed by Danbury Hospital.
Q: If I am covered under a claim filed by my employer, do I need to do anything at this time?
A: If you are searching these frequently asked questions, you most likely have received a letter from the hospital explaining the refund process that will take place. If you did not file an individual claim with the IRS for the refund of FICA taxes from 2001 to March 31, 2005, then please complete the attached form which gives the hospital the authority to act on your behalf in filing for the FICA refund. Please mail the completed form to: Danbury Hospital Payroll Department, 24 Hospital Avenue, Danbury, CT 06810
Q: What happens after I complete the form?
A: The hospital will collect all the responses and file a claim with the IRS for their share of the FICA taxes paid as well as medical resident’s employee portion. The IRS pays the refund directly to the hospital and the hospital in turn, will forward the FICA refund plus applicable interest to you.
Q: What action should I take if I filed an individual claim?
A: If you filed an individual claim for FICA taxes withheld while a medical resident, you also need to complete the form, waiving Danbury Hospital’s right to act on your behalf for claiming FICA taxes paid.
Q: Will I need to file an amended tax return for any years that I receive a FICA refund?
A: While you will receive an amended W-2 (Form W-2c) for the years that you received a refund; the FICA refund is not taxable, but the interest on the refund is taxable to you. In most cases, the Form W-2c will show a reduction in your earnings for social security coverage purposes in an amount equal to the wages you were paid for services performed as a medical resident. The refund is for social security and Medicare taxes and does not affect your gross or taxable income.
For More Information
Please visit the IRS web site for more information about FICA returns.