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The MDTAXES Network is an affiliation of CPAs that specialize in the tax planning and preparation for young health care professionals. Please leave your questions or comments for our CPAs, who visit the message board regularly, or review the answers, suggestions and ideas posted in response to your colleagues' questions.
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Doesn't look good for any more FICA refunds. Below is an analysis of IRS Chief Counsel Advice 200212029:
Compensation of Medical Residents Does Not Qualify for Student FICA Exception
Services provided to patients by medical residents are in the nature of “on-the-job training” and thus compensation paid to such students generally does not qualify for the §3121(b)(10) FICA exception for students, the IRS Chief Counsel's Office advised.
Following the Eighth Circuit's decision in Minnesota v. Apfel, 151 F.3d 742 (8th Cir. 199
, the IRS received numerous FICA refund claims under §3121(b)(10). The Chief Counsel's Office issued a series of memorandums providing guidance to IRS personnel in examining such claims. As a follow-up, the Chief Counsel was asked whether services provided by medical residents to patients are “incident to and for the purpose of pursuing a course of study” so as to qualify for the §3121(b)(10) student FICA exception.
The Chief Counsel's Office advised that medical residents providing patient care services are engaged in a form of “on-the-job training” and therefore generally do not meet the student FICA exception. Citing the Eighth Circuit's decision, the Chief Counsel's office explained that there are two key legal standards against which it must analyze the facts to determine student status for purposes of §3121(b)(10)
1) the employee must be enrolled and regularly attending classes; and (2) the relationship between the employee and the educational institution must be examined to determine whether the services are “incident to and for the purpose of pursuing a course of study.”
The Chief Counsel examined a variety of factors, including: whether patient care is the primary activity in the resident/employer relationship; the degree of emphasis placed on didactic activities (supervision of patient care, nature of attending physician/resident relationship); the nature and scope of educational activities (classroom instruction, rounds, conferences, lectures, research projects, testing); residents' compensation, benefits, and employment terms; and the economics of hospital operations where residents are used to provide patient services. The Chief Counsel's Office concluded that residents' activities were more in the nature of “on-the-job” training than those of being a student.
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You can find the IRS' Chief Counsel Advice 200212029 at:
http://www.irs.gov/pub/irs-wd/0212029.pdf
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Doesn't look good for any more FICA refunds. Below is an analysis of IRS Chief Counsel Advice 200212029:
Compensation of Medical Residents Does Not Qualify for Student FICA Exception
Services provided to patients by medical residents are in the nature of “on-the-job training” and thus compensation paid to such students generally does not qualify for the §3121(b)(10) FICA exception for students, the IRS Chief Counsel's Office advised.
Following the Eighth Circuit's decision in Minnesota v. Apfel, 151 F.3d 742 (8th Cir. 199 , the IRS received numerous FICA refund claims under §3121(b)(10). The Chief Counsel's Office issued a series of memorandums providing guidance to IRS personnel in examining such claims. As a follow-up, the Chief Counsel was asked whether services provided by medical residents to patients are “incident to and for the purpose of pursuing a course of study” so as to qualify for the §3121(b)(10) student FICA exception.
The Chief Counsel's Office advised that medical residents providing patient care services are engaged in a form of “on-the-job training” and therefore generally do not meet the student FICA exception. Citing the Eighth Circuit's decision, the Chief Counsel's office explained that there are two key legal standards against which it must analyze the facts to determine student status for purposes of §3121(b)(10)1) the employee must be enrolled and regularly attending classes; and (2) the relationship between the employee and the educational institution must be examined to determine whether the services are “incident to and for the purpose of pursuing a course of study.”
The Chief Counsel examined a variety of factors, including: whether patient care is the primary activity in the resident/employer relationship; the degree of emphasis placed on didactic activities (supervision of patient care, nature of attending physician/resident relationship); the nature and scope of educational activities (classroom instruction, rounds, conferences, lectures, research projects, testing); residents' compensation, benefits, and employment terms; and the economics of hospital operations where residents are used to provide patient services. The Chief Counsel's Office concluded that residents' activities were more in the nature of “on-the-job” training than those of being a student.
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