The IRS proposes clarifying the student exception to the FICA (Social Security and Medicare) taxes for students employed by a school, college, or university where the student is pursuing a course of study. The proposed regulations clarify that whether the organization is a school, college, or university depends on the organization’s primary function. They also clarify that whether employees are students for this purpose requires examining the individual’s employment relationship with the employer to determine if employment or education is predominant in the relationship.
The IRS also released a notice suspending existing guidance providing that only students enrolled at least half-time at certain institutions of higher education qualify for the exception. The notice proposes a new revenue procedure that is consistent with the proposed regulations and provides interim reliance.
The following documents provide more details:
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REG-156421-03
Proposed Regulations that provide guidance regarding the meaning of "school, college, or university" and "student" for purposes of the student FICA exception under sections 3121(b)(1) and 3306(c)(10)(B) of the Internal Revenue Code.
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Notice 2004-12
This notice contains a proposed revenue procedure providing a safe harbor that certain institutions of higher eduction, and certain affiliated organizations can use in applying the exception for services performed by a student under section 3121(b)(10) of the Internal Revenue Code.
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Background Information
Background information on the proposed regulations and notice providing guidance on the student FICA exception (Section 3121(b)(10) of the Internal Revenue Code).
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