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The IRS May Owe You Money

Several medical schools and universities sued the IRS for taking FICA taxes out of resident paychecks. The theory was that a “student exception” to tax laws also applied to residents and interns. As of 2005, the IRS changed the tax laws to close this loophole.

The IRS recently accepted the position that FICA taxes should not have been taken from intern and resident paychecks prior to 2005 and is now in the process of submitting refunds to the hospitals and residents who made claims.

If you were a resident before 2005, you may be entitled to a refund of any FICA taxes that you paid, in addition to statutory interest. Check with your training program to see whether it filed a claim on your behalf. I have heard through other docs that training programs will need to submit finalized claims in the near future, so act sooner rather than later if this situation may apply to you.

If your training program did not file a claim on your behalf, you may be out of luck since the statute of limitations has passed for filing such claims. Talk with your tax professional.

More answers to questions about this refund are here: http://www.irs.gov/charities/article/0,,id=219547,00.html

Any tax gurus out there? Since the statute of limitations has passed on the ability for an individual to claim these refunds and interest, can that money now be written off by individual taxpayers as an uncollectable debt?

6 Responses to “The IRS May Owe You Money”

  1. ThorMD says:

    If your training program didn’t file a claim on your behalf or you haven’t already filed one on your own behalf, then you’re SOL (by about 4 years).

    • JustADoc says:

      How nice of the IRS to aacknowledge the problem just as soon as it is too late to do anything about it. I was a resident during the time in question. I and a fellow resident asked the hospital about it. The hospital refused to follow up on it. So, do I ask the hospital to reimburse me the $4000 extra taxes I paid?
      It’s just annoying. We asked. We were told no. Lazy hospital. Without their backing it was not realistic to sue the IRS ourselves. Though I guess we could have tried.

      • ThorMD says:

        You could have filed a claim with the IRS on your own behalf way back when. I know several people who did that.

  2. ERP says:

    Yep. I’m supposedly getting 10 grand back!!!

  3. Gene says:

    I know that my residency program filed on behalf of residents that it would effect (I think they were able to file back to 2002, since you have only a certain number of years to send an amended return). It did not affect me. HOWEVER, it did affect me while in graduate school and I DID get a refund. Not much (you think a resident’s salary sucks? try a graduate student!), but every little bit helps.

  4. I can’t imagine a hospital wouldn’t file a claim on your behalf, since they are trying to recuperate their half of FICA (about $10,000 per resident over a three year period)

    Over the years (it’s been seven years now since residency) I’ve filled out and returned multiple forms requested by my hospital for this purpose.

    I wrote about the FICA refund for residents back in June 2010. By the way the refund is going to be tax free (because it’s an overpaid “tax”) AND it comes with interest too.

    Chalk a minor win up for doctors everywhere.
    http://thehappyhospitalist.blogspot.com/2010/06/will-residents-get-back-all-their-fica.html

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