Medical Resident FICA Refund Claims

Since the late 1990s, District courts have considered whether medical residents should be considered students - and therefore exempt from paying Federal Insurance Contribution Act (FICA) taxes - or employees who must pay the tax.

On April 1, 2005, the IRS issued regulations that more clearly articulated its position that medical residents are subject to FICA withholding. The Supreme Court subsequently upheld those regulations. In March 2010, the IRS agreed to pay refunds for residents who had paid FICA taxes prior to April 1, 2005.

Meanwhile, in the late 1990s, the University of Kansas was undergoing an audit by the Internal Revenue Service. The auditing firm, Deloitte, raised the question of medical residents' employment status. Because the university was undergoing an IRS audit, it was eligible to apply for a refund for all of the years that were open under the audit - calendar years 1993 through 1999.

Since May 2010, Deloitte, on behalf of the university and the State of Kansas, has been working with the IRS on the State of Kansas claim and has contacted individual medical residents for permission to file a claim on their behalf. The State of Kansas began receiving refund checks in November.

In his budget recommendations for fiscal year 2014, Gov. Sam Brownback has recommended that $10 million of the state's $26 million refund be allocated for a new health education building proposed for the University of Kansas Medical Center.

When all refunds are received by the state from the IRS, the State of Kansas will issue checks to individual medical residents who consented to have a claim filed on their behalf. The amount individuals receive will include the amount of FICA paid plus interest.

Some alumni residents in Wichita, Kan., and in the other parts of the country have received their refunds; however, many others have not.

Individuals who were medical residents at the University of Kansas Medical Center will receive a letter with the refund check that provides the details of the eligible years, the amount of the FICA returned and the interest payment. The FICA return is not taxable but the interest is taxable; individuals will receive a 1099-INT on this portion and should consult with their own tax advisors.

In the meantime, they should send any change of name or address to: Kansas@deloitte.com or FAX: 312-247-4918.