Resident Refunds


The IRS has sided with medical residents and their employers who for years have argued that they should have always been eligible for the “student exemption”—but don’t count on any money just yet.

By mid-June, the IRS expects to have contacted hospitals, universities, and individual residents who filed Social Security and Medicare payroll tax refund claims as of April 1, 2005. The date is significant because it is when the IRS ruled that employees who work 40 hours or more at a school, college, or university are eligible for student exemptions.

The IRS’ administrative decision in early March affects taxes paid before 2005.

The IRS has only taken the first step and says instructions on how to further process claims will be forthcoming. For now, the federal agency says, “employers and individuals with pending claims do not need to take any action at this time.”

Still, Joseph Ming-Wah Li, MD, SFHM, assistant professor of medicine at Harvard Medical School and director of the hospital medicine division at Beth Israel Deaconess Medical Center in Boston, urges hospitalists to pay attention to the refund; over three years of residency, it could amount to several thousand dollars per physician.

“The government ruling recently was that residents should be treated more like students instead of employees,” says Dr. Li, SHM's president-elect.

Hospitals, medical schools, and residents themselves have been filing so-called “FICA refund claims” since the 1990s. A series of legal challenges led to opposing interpretations of tax codes, leading the IRS to suspend all claims until a ruling was made.

And while pending claims will now be processed, it is too late for new claims to be filed. However, residents who did not file individual claims in what the IRS calls a “timely fashion” should check with their residency institution to determine if a claim was filed on their behalf.

Read "Dr. Hospitalist's" take on this topic in this month's issue of The Hospitalist.

For more details, visit the IRS website.

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