| 1. |
Why did I receive a letter and Employee Consent Form from Virginia Mason Medical Center?
You may be eligible for a refund of certain Federal Insurance Contribution Act (FICA) payroll taxes withheld from your paycheck when you were a medical resident at Virginia Mason Medical Center.
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| 2. |
What are FICA taxes?
FICA stands for the Federal Insurance Contributions Act. FICA taxes
consist of two separate taxes, social security tax and Medicare tax, which are paid with respect to wages earned for services performed. Employers withhold and pay their employees' share of the FICA taxes and also pay the employer share.
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| 3. |
Why are FICA refunds being paid to medical residents and their employers?
Employers (typically teaching hospitals and medical schools) and individual taxpayers (medical residents) began filing FICA refund claims in the 1990's, based on their position that medical residents are students eligible for the FICA tax exception under Internal Revenue Code section 3121(b)(10). This 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 employer's FICA refund claims were for both the employer share and the employee share of the FICA taxes. In some cases, individual medical residents filed their own refund claim for the employee share of the FICA taxes. The IRS held the claims in suspense because there was a dispute as to whether the student FICA exception applied. On March 2, 2010, the IRS decided to accept the position that medical residents are not subject to FICA taxes for tax periods ending before April 1, 2005, when new IRS regulations went into effect.
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| 4. |
What must I do to claim my refund?
In most cases, you cannot claim your medical resident FICA refund as an individual because the time period for filing an individual refund claim with the IRS has expired. To receive your refund, you must complete the Employee Consent Form to allow Virginia Mason to act on your behalf. Return the completed form to the address at the bottom of the form by October 5, 2010. If you need another Employee Consent Form click here. If you consent, Virginia Mason will pay you your share of the medical resident FICA refund, plus statutory interest, if we receive a refund for you from the IRS.
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| 5. |
Is there anything that can prevent me from receiving my refund?
In certain cases, the entire amount of FICA taxes may not be refundable. For example, if after completing your residency you were hired at Virginia Mason as an associate, a Chief Medicine Resident, or a fellow in a fellowship not accredited by the Accreditation Council for Graduate Medical Education (ACGME), then the taxes on that portion of your employment will not be refundable. In addition, we cannot predict whether the IRS will raise issues that will delay or prevent Virginia Mason or any particular resident from receiving a refund.
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| 6. |
For what time period is Virginia Mason claiming FICA refunds under this IRS program?
Virginia Mason is claiming refunds for 1996 through March 31, 2005, except for 2002. The year 2002 is not included because Virginia Mason did not file a refund claim for that year and cannot obtain a refund of its employer share of the taxes. Most medical residents also will not be able to claim their share of FICA taxes for 2002 because the time period for filing an individual claim has expired.
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| 7. |
Why won't the IRS refund FICA taxes for tax periods after April 1, 2005?
The IRS changed its regulations on April 1, 2005 to exclude full time employees from the student exception. Based on these new regulations, the IRS's position is that the earnings of medical residents are subject to FICA taxes on or after April 1, 2005. A number of academic medical institutions are challenging the validity of these regulations and the U.S. Supreme Court has granted review to consider the issue. Virginia Mason is considering its options with respect to these later tax years and is in the process of filing refund claims to preserve its rights.
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| 8. |
How much will my refund be?
In most cases, the IRS will refund all FICA taxes withheld from your paycheck when you were a medical resident at Virginia Mason from January 1, 1996 through March 31, 2005 (except for 2002), plus statutory interest.
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| 9. |
How long will it take to receive my refund if I submit an Employee Consent Form?
It may take several months or longer before medical residents who have submitted Employee Consent Forms will receive refund checks. A number of actions must occur first. Virginia Mason will collect consent letters from medical residents until October 5, 2010. After that date, Virginia Mason will prepare its refund supporting data and submit it to the IRS. The IRS will verify Virginia Mason's information, calculate refunds and statutory interest, and issue lump sum checks to Virginia Mason. The checks will include both the employer and employee share of FICA taxes. Virginia Mason will be responsible for issuing checks and corrected tax information to medical residents who have submitted Employee Consent Forms.
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| 10. |
Will I have to pay taxes on the FICA tax refund I receive?
The FICA tax refund is not taxable, but the interest on the refund is taxable to you. Virginia Mason is required to file Form 1099-INT with the IRS and furnish a copy to you if we pay you interest of $600 or more in a calendar year. Even if the interest is less than $600 and we do not issue you a Form 1099-INT, the interest is still taxable to you.
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| 11. |
What if I worked at more than one hospital as a medical resident during the tax periods ending before April 1, 2005.
The Employee Consent Form is applicable to only one employer at a time. If you were a medical resident at another hospital during that period, please obtain an Employee Consent Form from that hospital and complete it. Remember to keep a copy of each completed form for your own records.
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| 12. |
How will claiming this refund affect my Social Security benefits?
In most cases, your earnings for any years for which you claim the medical resident refund will be reduced for social security coverage purposes. The reduction will be in an amount equal to all wages you were paid for services performed as a medical resident. Based on your 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 possible effect on your social security benefits, you should contact the Social Security Administration directly at 1-800-772-1213.
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| 13. |
Do the years for which I claim refunds have to be sequential?
If you wish to file your medical resident claims for some years, but not others, check the option that you consent for only the noted years and mark the year(s) you are eligible.
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| 14. |
What happens if I do nothing?
If you choose to do nothing, you may be precluded from receiving any refund of FICA taxes withheld and paid on your behalf because the time period for filing an individual claim for refund with the IRS may have expired.
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| 15. |
Who do I contact for more information?
You may contact Virginia Mason's FICA refund claims administrator, Gilardi & Co. LLC, at (866) 283-4319 or mail to:
Virginia Mason FICA Refund Administrator
c/o Gilardi & Co., LLC
P.O. Box 1110
Corte Madera, CA 94976-1110
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