Physicians Could Be Eligible to Receive IRS Refund
I heard the Internal Revenue Service is going to refund the employment taxes physicians paid when they were residents. Is this true? If so, how do I go about filing for this?
J. Byrne, MD
Dr. Hospitalist responds: On March 2, the IRS announced that it had “made an administrative determination to accept the position that medical residents are excepted from FICA taxes based on the student exception for tax periods ending before April 1, 2005, when new IRS regulations went into effect.”1 For folks like me, who have a hard time understanding the different numbers on my paycheck, here is an explanation. (I am neither an attorney nor an accountant; for any such counsel, I suggest you visit a professional.)
Federal Insurance Contributions Act, or FICA, taxes are the payroll taxes collected for Medicare and Social Security programs. These taxes fund insurance programs for the elderly, disabled, survivors (Social Security), and for healthcare (Medicare). This tax originated in 1935. Employees and employers are required to make regular contributions to FICA through payroll deductions. For 2010, the FICA tax rate is 7.65% (6.2% for Social Security and 1.45% for Medicare) on gross earnings (earnings before any deductions). The individual contribution limit for the Social Security program is 6.2% of wages up to $106,800 (a $6,621.60 cap per individual). Unlike Social Security, there is no cap on contributions to the Medicare program. Individuals and employers each contribute 1.45% of wages earned (for a total of 2.9%) to fund the Medicare program.
House staff traditionally participate in this government insurance program by contributing FICA taxes. But in the 1990s, employers and individuals began filing FICA refund claims to the IRS based on the student exception (Internal Revenue Code section 3121(b)(10)). It is my understanding that this section of the IRS code exempts students from the FICA tax.
So are house staff recognized as students under the eyes of the law? In the 1998 court case State of Minnesota vs. Apfel, the court opined that University of Minnesota house staff exist for the primary purpose of education, rather than for earning a livelihood. Based on that ruling, the IRS chief counsel issued a memorandum in July 2000 that stated house staff could meet the FICA student exemption if 1) the house staff’s employer is a school, and 2) the house staffer is considered a student by the employer.
So why has it taken so long for the IRS to decide to refund these dollars? Over the past decade, there have been other court cases with conflicting interpretations of the IRS code. In January 2005, the IRS implemented new regulations that did not require house staff to contribute FICA taxes. But this new regulation did nothing about past house-staff contributions. Last year, in another Minnesota case, Mayo Foundation for Medical Education and Research vs. the United States, the court again interpreted the IRS regulations as limiting the student FICA exception to students who are not full-time employees. Despite other ongoing lawsuits, the IRS has decided that individuals who were house staff prior to April 2005 and meet the criteria are excepted from FICA taxes.
So who is eligible to receive these FICA taxes refund? It is my understanding that if you are a house officer who contributed to FICA taxes prior to April 2005, you are eligible for a refund only if you or the institution where you trained filed a claim in a timely fashion. The period of limitation for filing a claim has expired. If you think that you are covered by a claim, the IRS states that you should expect to hear from the institution where you trained about the refund process. You will not be hearing from the IRS directly.
For more information, call 800-919-1703 or visit www.irs.gov/charities and click on “Medical Resident FICA Refund.”
Is the Economy Having a Negative Effect on Hospitalist Jobs?
I will start my senior year as a medical resident in a few months. I am interested in a career as a hospitalist. While I hear that there are a lot of hospitalists out there, one of my friends has been looking for a hospitalist job in the Northeast and has had some difficulty landing a position. Is the problem the area or the economy? Is there anything I can do to make myself a more attractive candidate?
Reza Mohan, MD
Dr. Hospitalist responds: Congratul-ations on reaching this stage in your training as a physician; this is the time you can start thinking about your career as a hospitalist. While I understand your desire to land a plum job upon completion of training, I want to encourage you to focus your efforts during your last year of training. Becoming the best doctor possible might be the best preparation to land the ideal HM job.
It is true that since 1996, when the term “hospitalist” was first coined, it has been easy to land HM jobs. The field exploded out of nowhere, and now boasts more than 30,000 hospitalists after little more than a decade. Atlanta, Boston, San Diego, Seattle … hospitalist jobs were plentiful.
While it has been good for physicians looking for jobs, I am not sure it has been ideal for patients. I would argue that the easy availability of jobs has attracted people to our profession who probably are not ideally suited to be hospitalists. From a quality perspective, wouldn’t we be better off if there were more competition for hospitalist jobs? In fact, I am hearing talk from colleagues around the country that there are a few places where it is increasingly more difficult to land a hospitalist job. Seattle and Boston are two such places.
That said, one only has to look at the job ads in the preceding pages of The Hospitalist and the SHM Career Center (www.hospitalmedicine.org/careers) to see that HM jobs are still plentiful in most parts of the country. I would not worry about not being able to land a job as a hospitalist when you finish training. However, you might not be able to find a great job in the city of your choice.
If you are interested in networking, I encourage you to speak with HM physicians at your hospital and in your community. Don’t pass up the opportunity to attend a local SHM chapter meeting or a regional conference; both are great for connecting with hospitalists and hiring managers. Another option is to sign up with an SHM e-mail listserv, so you have the opportunity to participate in online discussions with hospitalists. TH
- IRS to honor medical resident FICA refund claims. IRS Web site. Available at www.irs.gov/charities/article/ 0,,id=219548,00.html. Published March 2, 2010. Accessed April 14, 2010.