Janice Lozano
Student employees are not exempt from paying taxes. Their earnings are subject to both federal and state income taxes. The withholding of federal and state taxes depends on the student's biweekly gross income and how they file their Form W-4 and state withholding forms. Students may be eligible for tax exemptions, such as the FICA (Social Security and Medicare) tax exemption, if they are enrolled for a minimum number of credit hours and working on campus. International students may also be eligible for tax treaty benefits, depending on their country of origin and immigration status. It is important for student employees to understand their tax responsibilities and seek advice from the appropriate authorities to ensure accurate tax filings.
| Characteristics | Values |
|---|---|
| FICA tax exemption | Students employed by a school, college, or university where they are pursuing a course of study are exempt from FICA (Social Security and Medicare) taxes. |
| FICA tax withholding | Based on the number of credit hours a student is enrolled in. Students must be enrolled at least half-time to be eligible for FICA exemption. |
| Graduate assistants | Eligible for FICA exemption if enrolled for at least half-time during the summer and less than half-time during the academic year. |
| Summer employment | FICA taxes are withheld unless enrolled/attending class in accordance with half-time standards for the summer session. |
| International students | Subject to federal and state income taxes, but may be eligible for tax treaty benefits. |
| Non-resident students | Remain FICA tax-exempt regardless of credit hour enrollment. |
| Off-campus work-study students | Subject to FICA deductions. |
| On-campus work | Undergraduate and graduate students enrolled for six or more credits and working on-campus are exempt from FICA deductions. |
| Tax forms | Form W-4 for federal income tax withholding exemption, Form W-2 for federal and state tax returns, Form 1098-T, Form 1098-E, Form 1042-S for international students with tax treaties, Form M-4 for non-Massachusetts residents to stop state tax withholding. |
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What You'll Learn
Student employees and FICA tax exemptions
Students who are employed by a school, college, or university where they are pursuing a course of study may be exempt from FICA (Federal Insurance Contributions Act) taxes. FICA taxes are imposed on all wages paid or received with respect to employment, and employers are required to withhold FICA taxes from employee wages and pay a matching contribution. However, certain student employees may be exempt from paying these taxes under specific circumstances.
To qualify for the student FICA tax exemption, the student must be employed by an educational institution where they are also enrolled and regularly attending classes. The student's primary purpose for being associated with the institution must be to pursue an educational credential. Additionally, the student must not be a full-time employee, a professional employee, or a career employee eligible to receive certain employment benefits. The student's employment relationship with the educational institution should be predominantly for educational purposes rather than employment.
The student FICA tax exemption also has specific requirements regarding the timing of employment. It applies only to employment during school breaks of five weeks or less, and students must be eligible for exemption on the last day of classes preceding the break. Summer employment is generally not exempt from FICA taxes unless the student is enrolled and attending classes in accordance with half-time standards for the summer session. Services performed between the fall and spring semesters are typically eligible for the exemption.
Certain positions, such as postdoctoral students, postdoctoral fellows, medical residents, and medical interns, are not eligible for the student FICA exemption because the services performed are not considered incident to pursuing a course of study. Additionally, if a student worker holds multiple appointments during a semester or summer, at least one of which confers professional, career, or full-time employee status, FICA taxes will be withheld from all earnings, and no exemption will be allowed.
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International student employees and taxes
International students in the US on F-1 visas are generally considered nonresident aliens for tax purposes for the first five calendar years of their stay. However, they may be considered 'resident aliens' for tax purposes if they pass the substantial presence test. As nonresident aliens, international students are required to file Form 1040-NR (federal tax return) to assess their federal income and taxes. They may also be required to file a state tax return, depending on the state. Additionally, they must complete Form 8843, which is a statement required by the US government for certain nonresident aliens. This form is due by April 15, 2025, and lets the Internal Revenue Service (IRS) know how long they have been in the US.
International students on F-1 visas are exempt from paying Social Security and Medicare taxes, commonly known as FICA. However, they are required to pay both federal and state income taxes on their earnings. These taxes are typically withheld from their pay, and they must file a tax return as part of the process. The amount of tax they pay depends on their income, the tax rates of their state, and their entitlement to tax treaty benefits. The US has income tax treaties with 65 countries, which may result in exemptions or reduced tax rates for students from those countries.
It is important for international students to comply with tax requirements and meet deadlines, as failing to do so can result in fines and penalties. Additionally, it can jeopardize their chances of securing a US visa or Green Card in the future. To navigate the complex tax code and ensure compliance, international students can seek help from their school's international student center or consult a professional.
In contrast, international students on M-1 visas are generally not allowed to accept employment and, therefore, do not typically pay taxes. However, in rare situations where they receive income, such as during practical training, they may be required to file an income tax return. International students on J-1 visas, on the other hand, are required to pay income taxes on their earnings, including federal, state, and/or local taxes.
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Graduate students and FICA deductions
Graduate students are generally exempt from paying FICA (Federal Insurance Contributions Act) taxes on their wages. FICA taxes are a type of payroll tax that funds Social Security and Medicare programs. However, the exemption for graduate students depends on certain conditions.
Firstly, the employing organisation must be a school, college, or university, and its primary function must be education. This means that graduate students employed by research institutions that are not primarily universities may not qualify for the exemption. Secondly, the student's primary relationship with the organisation must be as a student rather than an employee. This means that even graduate students at universities may have to pay FICA taxes if their primary relationship with the university is as an employee.
Additionally, graduate students must meet certain enrollment requirements to qualify for the FICA exemption. They must be enrolled at least half-time, and their course of study must require at least two semesters, trimesters, or quarters to complete and lead to a degree, certificate, or other recognised educational credential. Graduate students who are in their last semester or trimester and are enrolled in the required number of credit hours to complete their degree may also qualify for the exemption.
It is important to note that graduate students receiving fellowships are also exempt from FICA taxes, but this is because they are not considered employees receiving wages, rather than due to their student status. Furthermore, postdoctoral students, postdoctoral fellows, medical residents, and medical interns are generally not eligible for the student FICA exemption because their work is not considered incidental to pursuing a course of study.
Overall, while graduate students often qualify for the FICA tax exemption, it is important for individuals to review the specific guidelines and consult with their institution to determine their eligibility.
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Student employees and Form W-4
Students who are employed part-time or during the summer may wonder how their student status affects their taxes and what they should fill out on Form W-4. In general, student employees are exempt from FICA (Social Security and Medicare) taxes if they are employed by a school, college, or university where they are pursuing a course of study. However, this exemption does not apply if the student's work confers professional, career, or full-time employee status, or if they receive certain employee benefits. Additionally, summer employment is only exempt from FICA taxes if the student is enrolled in classes during the summer session.
When it comes to Form W-4, this form is used to tell your employer how much federal income tax withholding to keep from each paycheck. While it is not required to fill out a new Form W-4 every year, it is recommended to review your federal withholding annually or if you experience any significant life changes, such as getting married or having a baby. On the form, you will need to provide your personal information, including your name, address, Social Security number, and tax filing status. If you are a student who can be claimed as a dependent on your parent's tax return, you may need to coordinate with your parents when filling out your W-4 to ensure that deductions and dependents are only accounted for on one tax return.
It is important to note that being a full-time student does not exempt you from federal income taxes. Even if your income is below the filing requirement for your age, status, and dependency, you may still choose to file a tax return if you are entitled to a refund of withheld income tax or if you are eligible for a refundable credit. Additionally, if your employer is not withholding federal income taxes, Social Security, and Medicare from your pay, it may be because they consider you an independent contractor rather than an employee. In such cases, you are responsible for paying your own income tax and self-employment tax.
To determine if you may claim exemption from income tax withholding as a student employee, you should consider completing a new Form W-4 each year and whenever your personal or financial situation changes. By staying up to date with your tax forms and understanding the tax implications of your student employment, you can ensure that you are compliant with tax laws and make informed decisions about your finances.
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Student employees and tax advice
As a student employee, you may need to file income taxes each year that you are employed. Your earnings may be subject to both federal and state income taxes. However, this depends on your biweekly gross income and how you file your Form W-4 and state withholding forms. You can seek advice from the Internal Revenue Service about how to file the Form W-4, or advice from your resident state about how to complete your state withholding form.
If you are an international student, you are subject to both federal and state income taxes. However, if you are from a country with a tax treaty with the US, you may be eligible to exempt a portion of your earnings from taxes.
There are some cases where students are exempt from FICA (Social Security and Medicare) taxes. Undergraduate students enrolled for six or more credits who are working on-campus during the academic year are exempt from FICA deductions. Graduate students who are enrolled in an academic semester with full-time certification and who are working on campus are also exempt from FICA deductions. Students employed by a school, college, or university where they are pursuing a course of study are also exempt from FICA taxes.
Summer employment is generally not exempt from FICA taxes unless you are enrolled and attending classes in accordance with half-time standards for the summer session. Services performed between the fall and spring semesters are usually eligible for the FICA exemption.
It is important to note that each state has its own filing requirements, so you should check with your state's taxing agency to determine your specific filing responsibilities.
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Frequently asked questions
Student employees are not automatically exempt from paying taxes. Their earnings may be subject to both federal and state income taxes. However, there are certain exemptions that students can qualify for, such as the FICA exemption.
The FICA exemption applies to students who are enrolled at least half-time and are working on campus. This means that Social Security and Medicare taxes will not be withheld from their earnings.
To determine if you qualify for any tax exemptions, carefully review the eligibility criteria for each exemption. You can also seek advice from the Internal Revenue Service or your resident state about how to complete your tax forms.
