In March 2010, the Internal Revenue Service announced that it would accept the position that medical residents are excepted from FICA taxes based on the student exception for tax periods ending before April 1, 2005. At that time, the IRS began contacting hospitals and universities, as well as medical residents, who filed FICA (social security and Medicare tax) refund claims for these periods with more information and procedures. The IRS announcement came after several cases litigating the medical resident FICA issue, most notably in the Sixth, Seventh and Eleventh circuits. The courts of appeals held that medical residents were not per se ineligible for the “student exception” from FICA tax. That is, the courts determined that medical residents at the hospitals in question qualified as “students” under Internal Revenue Code, thus allowing an exemption from FICA tax for the medical residents. The court decisions spurred the IRS to announce the FICA exception for tax periods prior to April 1, 2005.
On October 14, 2010, the IRS posted additional FAQs on the IRS website to clarify whether a resident, former resident or employer filed a timely claim and may be eligible for a refund under the program.