FICA IRS Student Guidelines and Rules
Students generally do not have to pay FICA taxes. The University follows IRS rules in determining a student's exemption from FICA withholding. FICA (Federal Insurance Contributions Act) refers to taxes for Social Security (OASDI) and Medicare. When eligible, OASDI is withheld at 6.2% and Medicare at 1.45%, for a total tax of 7.65%.
To be considered a student, an employee must be enrolled and regularly attending classes in pursuit of a course of study. In addition, the employee's services must be "incident to and for the purpose of pursuing a course of study," which means the relationship between the employer and the employee must be primarily educational.
Number of Credit Hours
Employees will be exempt from FICA taxes if they meet the minimum criteria for a half-time student:
- Undergraduate student: 6 credit hours
- Graduate student: 3 credit hours
- PhD candidate: 1 credit hour
- Advanced masters candidate: 1 credit hour (as long as they have completed their coursework and are working on a thesis or dissertation for credit by enrolling in these courses: 8888, 8777, 8666, 8444, and 8333).
Employees Not Eligible for Student FICA Exemption
Full-time employees: Those with a normal work schedule of 40 hours a week
Professional employees: Defined as employees whose work:
- Requires advanced knowledge in a field of science or learning
- Requires the consistent exercise of discretion and judgment
- Is predominantly intellectual and varied in character
Some exceptions may be made after considering all the facts and circumstances.
Career employees: Defined as those eligible for:
- Retirement plans
- Vacation, sick leave, and paid holidays
- Tuition benefits
- Life insurance, dependent care, and other considerations
Postdoctoral students and fellows
Medical residents and interns
Students Working at Beginning or End of an Academic Term
If the academic term begins or ends at any point within a pay period, the entire pay period is eligible for the exemption from FICA.
Breaks of Under or Over 5 Weeks
If the student is registered for the following semester, the student will be eligible for the FICA exemption if the break is less than five weeks. If the student works during a school break of more than five weeks (over the summer, for example), the student will not be eligible for a FICA exemption if the student is not attending classes during the break.
For More Information
For more details or questions about student FICA exemption and IRS Revenue Procedure 2005-11, contact Payroll Services at 4-UOHR (612-624-8647 or 800-756-2363).
The IRS can ignore the FICA exemption if the institution "inappropriately" applied the guidelines to mischaracterize the relationship between an employee and the institution to avoid paying FICA taxes.
Here are two examples where the anti-abuse rule applies:
- Research lab workers who had been career employees but were converted to non-career status and required to enroll in a certificate program granting six credit hours a semester for work experience in the laboratory
- An employee who worked full time for a university for many years, in a job generally performed by nonstudents, who enrolled for six credit hours of coursework a semester while continuing to work full time in the same job. It would be inappropriate to conclude that the employee's work has suddenly "become incident to and for the purpose of pursuing a course of study" just because the employee enrolled in coursework.