Payroll Taxes
IRS Reminds Employers of Nonresident Aliens About Rules for Tax Withholding
The IRS reminds employers with nonresident aliens that for wages paid on or after January 1, 2006, new procedures took effect. Because certain nonresident alien employees were experiencing overwithholding of income tax on their wages for services performed in the United State, the IRS has reconsidered the requirements for determining the amount of income tax to be withheld.
Introducing the New and Improved International Withholding Issues Toolkit
The FSLG office recently released a toolkit designed for employers of nonresident aliens. Also, there is a guide on the subject of foreign students and scholars.
Student FICA.....the Continuing Story
Developments on the issue of student exemption from FICA tax:
- The U.S. District Court for the District of New York ruled that a medical center was not entitled to refunds of FICA tax on its medical residents. Albany Medical Center, DC NY January 10, 2007.
- In a case of first impression, the Eleventh Circuit ruled medical residents may qualify for the Sec. 3121(b)(10) student exemption from FICA tax. The court held that services performed by medical residents are not categorically ineligible for the student exemption. Mt. Sinai Medical Center of Florida, Inc., CA-11 May 18, 2007.
- In a second case on the same issue for the Mayo Foundation, the U.S. District Court for the District of Minnesota has granted a refund of FICA taxes withheld and paid by a medical foundation for stipends given to medical residents. Mayo Foundation for Medical Education and Research and Mayo Clinic, DC Minn. August 3, 2007.
- You may recall that last year the IRS requested summary judgment in two cases, University of South Dakota School of Medicine (Center for Family Medicine, DC SD, August 17, 2006) and University of Chicago Hospitals (The University of Chicago Hospitals, DC Il East Div, September 8, 2006) where the IRS was relying on the ruling at the District Court level for the Mt. Sinai case. That request was denied. The USDSM case is located in the 8th Circuit, which is expected to follow the earlier ruling for the Mayo Foundation. The UCH case is in the 7th Circuit which has yet to rule on this issue. Given the conflicting rulings among the federal circuits, this issue may ultimately end up with the U.S. Supreme Court.
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