Since the 1990’s, many academic medical centers have filed claims with the IRS seeking refunds of FICA (social security and Medicare) taxes paid on medical resident salaries on the basis that the residents are students and exempt from FICA.  For the most part, the government has come out on the losing side when this issue has been litigated. 

The IRS has now announced that it plans to concede this issue for periods before April 1, 2005, when new IRS regulations went into effect.  The IRS’s brief announcement does not indicate the terms on which claims will be paid.  Still, the IRS notes that verification of the claim amount will be required and interest will be paid

The IRS is not conceding this issue for periods on and after April 1, 2005.  On that date, new regulations went into effect providing that the student exception from FICA tax does not apply if the individual works full-time, which of course residents do.  The Eighth Circuit decided last year that the new regulation was valid and precluded FICA tax refunds for residents after its effective date.  This case is the only appellate case on the issue to date.  The employers in that case, Mayo Foundation for Medical Education and Research and the University of Minnesota, have filed a cert. petition with the US Supreme Court; the Court has yet to act on that petition.


The IRS will, within 90 days of its announcement, begin contacting hospitals, universities, and medical residents who filed FICA refund claims for these periods with more information and procedures.

Employers and individuals with pending claims do not need to take any action at this time.

Taxpayers with currently pending suits should contact the Department of Justice attorney assigned to the case.

Organizations that employ residents and wish to keep their FICA claims for 2006 alive need to file refund claims by April 15, 2010.

For additional information about medical resident refund claims, please visit the IRS’s Questions and Answers section.