Academic journal article Journal of Accountancy

FICA for Medical Residents Splits Circuits

Academic journal article Journal of Accountancy

FICA for Medical Residents Splits Circuits

Article excerpt

Medical residents in a teaching hospital might be eligible for a student exemption from FICA taxes, a circuit court ruled recently, adding to a split among circuits on the issue.

The Eleventh Circuit vacated and remanded the decision of a Florida district court in United States v. Mount Sinai Medical Center, which had held that payments to medical residents were not exempt from FICA (for the earlier decision, see "Tax Matters," JofA, May 05, page 106).

FICA, which supports the Social Security Trust Fund imposes tax on the wages of employees and creates an equivalent liability for employers. Section 3121(b)(10), however provides an exception for "service[s] performed in the employ of ... a school, college, or university ... if such service is performed by a student who is enrolled and regularly attending classes at such school, college, or university." This exemption prompted Mount Sinai Medical Center of Florida Inc. to obtain a refund of approximately $2.5 million in FICA taxes paid and withheld from medical residents participating in the hospital's Graduate Medical Education Program (GMEP). The IRS then sued to recover the refund, claiming it was paid in error. …

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