IRS Will Begin Issuing Medical Resident FICA Refunds

Thursday, May 10, 2012

By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

The Internal Revenue Service (IRS) is now alerting hospitals that it has completed the review of their medical resident Federal Insurance Contributions Act (FICA) refund claims. The first hospitals to be notified may receive their FICA refund checks as early as May 2012. FICA deductions are a percentage of the employee's wages that are withheld to help fund both the Social Security and the Medicare Programs. The employer is also required to pay a certain amount based on the employee's wages.

According to the IRS, the refund will include the hospital's share of the FICA taxes plus interest. Additionally, the IRS has stated that the refunded FICA taxes are not taxable. However, the interest portion of the refund is taxable.

"Student Exception" Prompted FICA Medical Resident Refund Claims.

Employers of medical residents (hospitals, medical schools, etc.) began filing FICA refund claims in the 1990’s. This was based on their position that medical residents are students eligible for the FICA tax exception under Internal Revenue Code section 3121(b)(10). This is referred to as the "student exception." It applies to a student at a school, college or university who is also an employee of that school, college or university. Why the IRS took the position that medical residents were not to be treated the same as other graduate students is not clear.

The employers' FICA refund claims were for both the employer share and the employee share of the FICA tax. Until recently, the IRS suspended these refund claims because it wasn't certain that the student FICA exception applied to medical residents.

IRS Determines Medical Residents Fall Under Student Exception.

In March 2010, the IRS decided that medical residents are excepted from FICA taxes. This decision only applies to tax periods ending before April 1, 2005, when new IRS regulations went into effect. The new regulations excluded medical residents from the student exception.

The IRS is no longer accepting new medical resident FICA refund claims because the period of limitations for filing a claim has expired.

Issues Posed by IRS Medical Resident FICA Refunds.

To me, important questions that remain unanswered include:

• Will medical residents' incomes from their residency be counted toward their retirement pay or disability pay under the Social Security Act (SSA), if they obtain a refund?

• Will hospitals be required to account for this as additional income on Medicare and Medicaid cost reports in the year(s) received?

• Will hospitals (employers) properly refund the amounts due to the former residents (employees) when they receive this money from the IRS?

Contact Experienced Health Law Attorneys Today.

The attorneys of The Health Law Firm provide legal representation to medical students, residents, interns and fellows in academic disputes, graduate medical education (GME) hearings, contract negotiations, license applications, board certification applications and hearings, credential hearings, and civil and administrative litigations.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at www.TheHealthLawFirm.com.

Sources Include:

Internal Revenue Service. "IRS To Honor Medical Resident FICA Refund Claims." Internal Revenue Service.(Mar. 02, 2010). Press Release. From
http://www.irs.gov/pub/irs-tege/nr-2010_25.pdf

Internal Revenue Service. "Questions and Answers about Medical Resident FICA Refund Claims." Internal Revenue Service. (Jan. 30, 2012). From
http://www.irs.gov/charities/article/0,,id=219547,00.html

Mirsky, Ira. "IRS to Pay Medical Resident FICA Refund Claims for Tax Periods Ending Before April 1, 2005." McDermott Will & Emery. (May 3, 2012). From
http://www.mwe.com/IRS-to-Pay-Medical-Resident-FICA-Refund-Claims-for-Tax-Periods-Ending-Before-April-1-2005-05-03-2012/

About the Author:  George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida, area.  www.TheHealthLawFirm.com  The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone:  (407) 331-6620.

Tag words: IRS, FICA, medical residents, hospital residents, FICA refund, tax refund, FICA refund claim, student exception, hospital FICA refund, hospital FICA tax claims

5/10/2012

Comments:

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Tuesday, March 19, 2013
E. S. S. says:

My husband and I were in a residency/fellowship program for many combined years. The program, we just discovered, filed for the FICA refund but did not do anything significant to contact us about our eligibility or get the consent forms to us. Although it had our current address, it directed the firm implementing the refund process to our old address from the 1990s when we were in training. They have admitted they did less than nothing to contact us, even though my husband's current location is on his former department's website!! It represents a significant amount of money for us. I wonder if we have any recourse.

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Tuesday, March 19, 2013
The Health Law Firm says:

Good afternoon E. S. S., Thank you for commenting on our blog. If you would like to discuss this matter with one of our attorneys, I encourage you to call our office at (407) 331-6620.

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Monday, March 25, 2013
Frantz G. Saint Louis MD says:

I have done two years of Fellowships in Geriatric and addiction Psychiatry from July 1,2001 to june 30,2003. Am I eligible for the refunds since I have paid FICA Taxes.

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Monday, March 25, 2013
The Health Law Firm says:

Hello Frantz G., Every situation is different. We cannot give legal advice through our blog. If you'd like to discuss this matter further, you may call our office at (407) 331-6620 or contact us on the website (http://www.thehealthlawfirm.com/contact-us/).

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Wednesday, May 08, 2013
C.R. says:

My husband and I were both residents at Jackson Memorial Hospital in the early 1990's. I was there for 5 years and my husband for 7 years. We recently found out about this FICA Refund for Medical Residents. We have no other information. How can we find out if Jackson Memorial Hospital filed for a refund? What is the process of obtaining this refund for us, the former residents? Who will be issuing the refund, the hospital/employer, or the IRS. Will the refund be issued automatically to us, and if so, what is the process? If not, who do we contact in order to request the refund (besides your law firm).

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Wednesday, May 08, 2013
The Health Law Firm says:

I encourage you to call our office and speak with an attorney about your FICA refund. If you do want to pursue this matter, do not wait.

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Friday, May 24, 2013
Gretchen Zima says:

What is the recourse if I as a medical resident was never contacted for fica return. I was at Hershey medical center from 1999-2002 and at Jackson Memorial Hospital from 2003-2006. I was never contacted. Please advise on my recourse of action.

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Saturday, August 10, 2013
Jennifer Lefner says:

I was a pediatric resident at the University of Florida from 2002-2005. The University attorney has argued that its house staff were "state employees" and opted into the FICA program as a result of this status. I would like further information regarding any options I may have to argue for the FICA refund. Thank you.

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Friday, November 08, 2013
Brian Robinson says:

I also was a resident at Hershey Medical Center in 1999-2000 and a couple of years ago contacted them and was told that they knew nothing about this. Can I still recoup some of the money from that time period?

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Friday, November 29, 2013
Susan Nelson says:

resident at University of Illinois at Chicago- 1972-1974- is this way too long ago ? Many thanks Susan

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Thursday, March 20, 2014
Jill Gaieski says:

Hello. Do you happen to know why residents who did their clinics at a VA hospital would be exempt from this FICA settlement? Thanks- Jill

Response to: IRS Will Begin Issuing Medical Resident FICA Refunds
Monday, March 24, 2014
The Health Law Firm says:

Greetings Ms. Gaieski, Our attorney Catherine Hollis sent an e-mail to Mr. David Gaieski on Monday, March 24, 2014, at 10:19 a.m. The e-mail was in response to FICA resident refunds. If you do not receive this e-mail, please let us know. If we can be further assistance to you , please do not hesitate to call our office.

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