What are FICA taxes?
FICA stands for the Federal Insurance Contributions Act. FICA taxes consist of two
separate taxes, social security and Medicare taxes that are paid on wages earned
for services performed. Employers withhold and pay their employees' share of the
FICA taxes and also pay the employer share.
Why are FICA refunds being paid to medical residents and their employers?
Under the theory that medical residents should be excepted from FICA tax as students
under Internal Revenue Code section 3121(b)(10), some hospitals and medical schools
began filing FICA refund claims in the 1990's. This exception is referred to as
the student exception and may apply to a student at a school, college or university
who is also an employee of that school, college or university. The IRS initially
denied the claims under the belief that medical residents were employees being compensated
for services rendered. For those years that an employer filed a refund claim, the
claim includes two parts: the first part is the employer's FICA tax, and the second
part is the employee's FICA tax (for consenting medical residents only). In some
cases, individual medical residents filed their own claim for the employee share
of the FICA tax. The IRS held the claims in suspense because there was a dispute
as to whether the student FICA exception applied. The IRS made an administrative
determination to accept the position that medical residents are excepted from FICA
taxes for tax periods ending before April 1, 2005, when new IRS regulations went
Who is eligible to receive a refund?
Medical residents and fellows ("Medical Residents") who participated in residency
training at New York Hospital Medical Center of Queens prior to April 1, 2005
may qualify for a refund. Additionally, institutions that employed Medical Residents
are eligible to receive refunds if they are covered by timely filed FICA refund
claims. Institutions can be covered under FICA refund claims they filed themselves.
Individual medical residents can be covered under FICA refund claims they filed
themselves or under claims filed by the institutions that employed them. These refund
claims are subject to the same requirements that apply to all FICA refund claims
including verification by the IRS of the amount of the claim and payment of interest.
As an intern, resident or fellow, am I eligible for a FICA tax refund pursuant to
the claims filed by New York Hospital Medical Center of Queens?
New York Hospital Medical Center of Queens ("NYHQ") has no reason to believe that
interns, residents and fellows employed by NYHQ would not be eligible for a FICA
tax refund pursuant to the FICA tax refund claims NYHQ timely filed for periods
January 1, 1995 through March 31, 2005. However, in order to obtain your share of
FICA tax, you must consent to allow NYHQ to obtain your share of refundable FICA
taxes. NYHQ anticipates contacting residents by mail in order to obtain such consents
and a standard consent form is posted on this webpage.
What is the significance of April 1, 2005?
On April 1, 2005, new regulations regarding the student FICA exception became effective.
One part of these regulations states that an employee who works 40 hours or more
(full-time employee) for a school, college or university is not eligible for the
student exception. This part of the regulations excludes medical residents from
the student exception. The United States Supreme Court has agreed to hear a case
involving the validity of the IRS's regulations regarding the student FICA exception
and medical residents. New York Hospital Medical Center of Queens will continue
to monitor the legal developments for the post-Regulation periods.
How would this initiative impact my benefits from the Social Security Administration?
Whether an employee's social security benefits (either current or future) will be
reduced on account of removing wages from his or her social security earnings record
will depend on the employee's personal circumstances. A refund could have a detrimental
effect upon disability, survivors, or retirement benefits that you, or your family,
are receiving or may seek to receive in the future. If you want information about
the effect on your social security benefits, you should contact SSA directly toll-free
at: 800-772-1213. If you call or visit a Social Security office, please print out
these FAQs and bring them with you. It may help SSA answer your questions. You might
want to review your social security record before and after your refund has been
processed. You can use your current Social Security Statement or you can request
a copy of your Social Security Statement at the
If I do not consent, will my FICA wages be affected?
Medical residents who consent and obtain a refund will receive a revised W-2, known
as a W-2c, reporting reduced FICA wages. Recent IRS materials have not addressed
whether residents who do not consent (and thus receive no refund) are to be similarly
treated but imply that such social security earnings may not be impacted for non-consenting
residents. Future IRS and/or SSA materials may clarify this issue.
Will I receive interest on my refund?
Yes. The IRS will pay statutory interest when refunding these taxes and you will
receive your proportional share. Interest in excess of $600 will generally be reported
on Form 1099-INT as required by the IRS.
What must I do in order to be included in New York Hospital Medical Center of Queens's
FICA refund claim for medical residency and fellowship training that I received
prior to April 1, 2005?
If you are affected, you will receive a letter with detailed instructions about how
to participate in New York Hospital Medical Center of Queens's refund claim. If
you wish to participate, please read the materials thoroughly, complete and sign
the Consent Form, and return it as indicated on the instructions.
If I consent, when will I get my money?
Medical Residents who consent to participate in the refund claim should not expect
to receive their refund check from New York Hospital Medical Center of Queens for
several months after consenting. This is because there are multiple procedural steps
that must be undertaken by New York Hospital Medical Center of Queens and the government
after the consents are received and before New York Hospital Medical Center of Queens
is able to remit the refunds to the residents (i.e. filing final refund claims,
review and processing by the government, and allocation of interest to individual
What is the process that New York Hospital Medical Center of Queens must follow in
order for me to obtain my refund?
The IRS has instituted a process for all institutions that have pending refund claims.
Each claim must proceed through various steps. It will take several months to complete
this process and will be largely dependent upon how long the IRS takes to review
the New York Hospital Medical Center of Queens refund claims for all such years.
Once the IRS approves the Medical Resident claim(s), it is expected to take several
weeks or months for the IRS to issue such refund checks to New York Hospital Medical
Center of Queens. Post claim administration work (i.e. allocating interest to the
medical residents, issuing individual checks, and preparing Form W-2c) must then
Who should I contact if I have questions regarding this initiative or to update my
Each resident's personal tax situation is different. We encourage you to discuss
questions about your particular situation with your tax preparer or other personal
financial advisor. For general updates, please visit our website regularly. For
general procedural questions on this initiative that are not answered through these
frequently asked questions, you may contact Gilardi & Co, LLC at: (866) 286-7015
from 8:00 a.m. to 5:00 p.m. (PST).
The refund process may take more than a year to resolve. You will be personally
responsible for keeping your address information up to date. Failure to do so could
cause any refund checks to you to be undeliverable, and ultimately escheated to
the state of your last known residence.