Student FICA Information
For many years, the student FICA exemption has received much scrutiny. Initially the provision was simple, "service performed in the employ of a school college, or university. . . if such service is performed by a student who is enrolled and regularly attending classes at such school, college, or university is exempt from FICA". The regulations gradually changed to such a degree that eventually obscured the basic intent of the exemption. Congress later began to identify certain groups of students that were omitted from this definition and expanded the coverage to include other types of educational institutions or related exempt organizations. They also implemented a quarterly wage cap at this time, which eventually was removed.
In 2004, the student exemption was again reviewed extensively with the primary focus on defining criteria and the roll that medical residents play in an educational facility. The IRS issued new safe harbor rules for educational institutions to use when determining exemption status. Under the new safe harbor rules, an employee who is a half-time undergraduate or graduate student can qualify, provided that the person is not (1) a full-time employee working at least 40 hours per week, (2) a professional employee, which is defined as an employee whose primary duty consists of the performance of services requiring knowledge of an advanced type in a filed of science or learning, whose work requires the consistent exercise of discretion and judgment in its performance, and whose work is predominantly intellectual and varied in character, (3) an employee who receives certain employment benefit that result in status as a career employee. This would include benefits like retirement, vacation, sick or holiday pay, or (4) if the employee is required to be licensed under state or local law in order to perform the services the individual provides to the school, college, or university.