The Internal Revenue Service (IRS) recently won a long fought
victory over the student medical resident exception from employment
taxes under the Federal Insurance Contribution Act (FICA). In response
to a number of federal court decisions holding that the services of a
medical resident fell within the student exception from FICA taxes,
the IRS adopted revised regulations which provide that “[t]he
services of a full-time employee are not incident to and for the
purpose of pursuing a course of study.” The Eighth Circuit
reversed two district court decisions that found the revised
regulations to be an invalid exercise of IRS regulatory authority.
According to the court in Mayo Foundation for Medical Education and
Research v. U.S., No. 073242 (8th Cir. 6/12/09), IRS regulations
limiting the student FICA exception to students who are not full-time
employees is a permissible interpretation of the statute.
