The Student FICA Exception and Student Workers

Student FICA Exception

Section 3121(b)(10)-2 of the Internal Revenue Code deals with the FICA/Medicare taxation exception for services performed by certain students in the employ of a school, college, or university. In general, section 3121 (b)(10)-2 states that wages paid to students who are not full-time employees and who work for the institution at which they are enrolled half-time and regularly attending classes are excepted from FICA/Medicare taxation. A student's enrollment status is to be determined by academic term {Sec.3121(b)(10)-2(d)(3)(ii)}. For Minnesota State Colleges & Universities Spring and Fall terms, an undergraduate student enrolled for 6 credits and a graduate student enrolled for 3 credits are considered to be half-time students.

In general, Minnesota State Colleges & Universities student employees who work 30 hours or less a week, who are enrolled for 6 or more credits (3 or more if a graduate student) in the academic term associated with the pay period, and who are regularly attending classes will not have FICA/Medicare taxes taken from their wages.

Graduate Students & FICA Exception

A graduate student must have enrollment in the academic term that is associated to the pay period in order to qualify for the Student FICA Exception.

. a (graduate) student working on a dissertation or thesis must be actually enrolled at the university for such independent study during the academic term in question (Rev Rul 78-17, 1978-1 CB 306).Thus, graduate students and research assistants .who didn't register for courses or attend classes didn't satisfy the "enrolled and regularly attending classes" requirement, even though they were considered by the university to be engaged full-time in the study and degree programs (Rev Rul 74-109, 1974-1 CB 288).

Associating Academic Terms to Pay Periods

The following criteria based on Section 3121(b)(10) and Revenue Procedure 2005-11is used to associate an academic term to a pay period:

  • If the pay period straddles terms, that is if the end date of one term and the start date of the next term fall within the same pay period, the pay period may be tied to either term's enrollment. Example: Summer term ends 8/20, Fall term starts 8/21, and pay period 04 starts 8/9 and ends 8/22. Since pay period 04 straddles Summer and Fall terms, the institution can tie this pay period to either Summer or Fall term.
  • If the pay period falls completely in a between-term break of 5 weeks or less, the enrollment data for the term prior to the break must be used. Example: Summer term ends 7/28, Fall term starts 8/28 and pay period 04 starts 8/9 and ends 8/22. Because pay period 04 falls completely in the between-term break, it must be tied to Summer term enrollment.
  • If the pay period straddles a break and a term, the current term's enrollment data must be used. Example: Summer term ends 7/28, Fall term starts 8/21, pay period 04 starts 8/9 and ends 8/22. Pay period 04 must be tied to Fall term enrollment since it is the only term that includes any portion of the pay period.

Website Links

Student Exception to FICA Tax page on the IRS website contains links to Revenue Procedure 2005-11, which sets forth generally applicable standards for applying the Student FICA exception, and Treasury Decision 9167, which contains the final regulations providing guidance regarding the employment tax exceptions for student services.

You may also wish to read the complete text of the Student FICA Exception Internal Revenue Code Part 31 Section 3121(b)(10)-2.

Revenue Procedure 2005-11 sets forth generally applicable standards for determining whether services in the employ of certain schools, colleges, or universities performed by a student qualify for the exception FICA tax provided under ?? 3121(b)(10) of the Code (Student FICA exception).