Lana Oconnell
Students who are employed by a school, college, or university where they are pursuing a course of study are exempt from FICA (Social Security and Medicare) taxes. However, student workers are not automatically exempt from paying taxes as their earnings are subject to federal and state income taxes. The exemption applies to qualified student wages earned during a term in which the student is enrolled and to students who satisfy the half-time semester or summer session standards. The university will make student FICA determinations based on Revenue Procedure 2005-11 safe harbor guidelines, which outline the criteria for exemption.
| Characteristics | Values |
|---|---|
| Student labor payroll tax exemption | FICA (Social Security and Medicare) taxes do not apply to services performed by students employed by a school, college, or university where the student is pursuing a course of study. |
| Who is eligible for the exemption? | Half-time undergraduate or graduate students not considered a professional, career, or full-time employee qualify for the student FICA exemption. |
| Exemption during school breaks | The student FICA tax exemption applies only to employment during school breaks of five weeks or less. To be exempted, you must be eligible for exemption on the last day of classes in the academic period preceding the break and be eligible to enroll in classes following the break. |
| Exemption for post-qualifying PhD candidates | All post-qualifying PhD candidates in TA, GA, or student employee positions who are working on their dissertations will be exempt from FICA tax withholding. |
| Federal and state income taxes | Student workers are not automatically exempt from paying federal and state income taxes. Their earnings remain subject to these taxes. |
| Independent contractors | If an employer doesn't withhold federal income taxes, Social Security, and Medicare from pay, they may be treating the employee as an independent contractor (self-employed). Independent contractors are responsible for paying their own income tax and self-employment tax. |
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What You'll Learn
Student workers are not automatically exempt from paying taxes
To be eligible for the FICA tax exemption, students must meet certain criteria. Firstly, they must be enrolled and regularly attending classes at the institution where they are employed. Additionally, their educational relationship with the school must predominate over their employee relationship. This means that their employment must be incidental to and for the purpose of pursuing their course of study. For example, a teaching assistant or graduate assistant position may qualify for the FICA exemption if the student is enrolled at least half-time and their primary purpose for being at the institution is to obtain an education rather than solely for employment.
The FICA tax exemption also applies during school breaks of five weeks or less, provided that the student was eligible for the exemption on the last day of classes before the break and is eligible to enroll in classes after the break. Summer employment may also be exempt from FICA taxes if the student is enrolled and attending classes according to the half-time standards for the summer session. However, students with multiple appointments, one of which confers professional, career, or full-time employee status, will not be eligible for the FICA tax exemption and will have all wages subject to FICA withholding.
It is important for student workers to understand their tax obligations and determine if they qualify for any exemptions. They can seek advice from the Internal Revenue Service about how to file their taxes correctly and ensure they are complying with all relevant laws and regulations. Student workers should also be aware that their tax status may vary depending on their specific circumstances, and they may need to make estimated tax payments throughout the year to cover their tax liabilities.
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FICA tax exemption during school breaks
Student workers are not automatically exempt from paying taxes, as their earnings remain subject to federal and state income taxes. However, certain student workers are exempt from Social Security tax and Medicare tax (FICA taxes).
The student FICA tax exemption applies only to employment during school breaks of five weeks or less. To be exempted, you must be eligible for exemption on the last day of classes in the academic period preceding the break. You must also be eligible to enrol in classes following the break. The last day of classes is the last day of final exams for each semester. Summer employment will not be exempt from FICA taxes unless you are enrolled or attending classes in accordance with the half-time standards for the summer session. Services performed between the fall and spring semesters are generally eligible for the FICA exemption.
The FICA exemption also applies to students enrolled on less than a half-time basis if the student requires less than the above standards to complete the degree programme. During any semester or summer, a student worker with multiple appointments—at least one of which confers professional, career, or full-time employee status—will have FICA taxes withheld from all earnings, and no exemption will be allowed. A professional employee is defined as an employee whose work requires knowledge of an advanced type in a field of science or learning, necessitates the consistent exercise of discretion and judgement, and is predominantly intellectual and varied in character. Services performed by a “professional employee” generally cannot be considered incident to and for the purpose of pursuing a course of study. Therefore, these employees are not eligible for the student FICA exemption.
The law specifically distinguishes teaching assistant and graduate assistant positions, which qualify for the FICA exemption, provided that the above half-time standards are satisfied. All post-qualifying Ph.D. candidates in TA, GA, or student employee positions who are working on their dissertations will be exempt from FICA tax withholding. Individuals in this category must submit the FICA Exemption Request Form, signed by the department and student.
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Student FICA exemption criteria
Students who work part-time or full-time while enrolled in a course of study at a school, college, or university may be exempt from paying FICA (Social Security and Medicare) taxes on their wages. This exemption applies to students who are not considered full-time, career, or professional employees.
To qualify for the student FICA exemption, an individual must meet the following criteria:
- The individual must be at least a half-time undergraduate student or a half-time graduate or professional student. A half-time undergraduate student is defined as a student carrying a half-time academic workload, as determined by the institution, amounting to at least half of the workload of a full-time student.
- The individual must not be considered a full-time employee. This means that the student's primary purpose for being at the educational institution is to pursue an educational credential, and their employment is secondary.
- The individual must not be considered a career employee. This means that the student is not pursuing a long-term career with the employer and is only working incidentally to pursue their course of study.
- The individual must not be considered a professional employee. A professional employee is defined as someone whose work requires advanced knowledge in a field, involves the consistent exercise of discretion and judgment, and is predominantly intellectual in nature.
It is important to note that the student FICA exemption only applies to employment during school breaks of five weeks or less. To qualify for the exemption during a break, the student must be eligible for exemption on the last day of classes before the break and must be eligible to enroll in classes following the break. Summer employment is exempt from FICA taxes if the student is enrolled and attending classes in accordance with the half-time standards for the summer session.
Additionally, certain positions, such as teaching assistants and graduate assistants, may qualify for the FICA exemption if they meet the half-time standards. Students enrolled on less than a half-time basis may also qualify for the exemption if they require less than the standard number of credits to complete their degree program.
To determine eligibility for the student FICA exemption, employers and educational institutions must consider the specific facts and circumstances of each case. The IRS has also issued Revenue Procedure 2005-11, which provides safe harbor tests that, if met, will automatically qualify a student for the FICA exemption without the need for further analysis.
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Independent contractors and self-employment tax
Students who are employed by a school, college, or university where they are pursuing a course of study are generally exempt from FICA taxes (Social Security and Medicare taxes). However, this exemption does not apply if the student worker has multiple appointments during a semester or summer, with at least one of them conferring professional, career, or full-time employee status, or providing certain employee benefits. In such cases, FICA taxes will be withheld from all earnings.
Now, when it comes to independent contractors and self-employment tax, there are a few key things to know. If you are an independent contractor, you are generally considered self-employed. This means that your earnings are subject to self-employment tax, which includes Social Security and Medicare taxes (similar to FICA taxes). As a self-employed individual, you are responsible for paying these taxes directly, as there is no employer to withhold these taxes from your income.
To determine your tax obligations as an independent contractor, you can visit the Self-Employed Individuals Tax Center provided by the Internal Revenue Service (IRS). Here, you can find information on when and how to file your federal tax return, make estimated tax payments, and understand your specific tax obligations.
It's important to note that being classified as an independent contractor does not solely depend on the label of the relationship between the worker and the employer. Even if an individual is referred to as an independent contractor, if their work is controlled by an employer (in terms of what will be done and how it will be done), they may not be considered an independent contractor for tax purposes. In such cases, their earnings would generally not be subject to self-employment tax.
If a worker believes they have been improperly classified as an independent contractor, they can use Form 8919 to report and calculate their share of uncollected Social Security and Medicare taxes. Additionally, the Voluntary Classification Settlement Program (VCSP) allows taxpayers to reclassify their workers as employees for future tax periods, with partial relief from federal employment taxes. To participate in the VCSP, taxpayers must meet certain eligibility requirements and file Form 8952.
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Student wage tax reporting
In the United States, the Federal Insurance Contributions Act (FICA) imposes taxes on all wages with respect to employment. FICA includes Social Security and Medicare taxes. However, specific exemptions may apply to student workers. To be eligible for the FICA tax exemption, students must meet certain criteria, including being enrolled at least half-time and not having full-time employee status. Additionally, the work performed must be "incident to and for the purpose of pursuing a course of study," and their educational relationship with the school must predominate over their employment relationship.
The FICA exemption applies to employment during school breaks of five weeks or less, provided the student meets the eligibility requirements before and after the break. Summer employment may also be exempt from FICA taxes if the student is enrolled and attending classes according to the half-time standards for the summer session. It is important to note that postdoctoral students, medical residents, and certain other employee groups are generally not eligible for the student FICA exemption.
Students should consult with their employer to understand their tax withholding practices and determine if they are considered an employee or an independent contractor. If treated as an independent contractor, students are responsible for paying their income tax and self-employment tax. Students can seek guidance from the Internal Revenue Service (IRS) and utilize resources like the Tax Withholding Estimator tool to understand their tax obligations and properly report their wages.
Overall, student wage tax reporting requires students to be proactive in understanding their tax obligations, exemptions they may qualify for, and accurately reporting their income to comply with tax laws.
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Frequently asked questions
Students are not automatically exempt from payroll taxes, and their earnings remain subject to federal and state income taxes. However, certain students may be exempt from Social Security and Medicare taxes (FICA taxes).
The FICA tax exemption applies to students who are enrolled and regularly attending classes at a school, college, or university where they are employed. To be eligible, students must be enrolled at least half-time, not be full-time or professional employees, and their educational relationship with the school must predominate over their employment relationship.
The university or employer will typically make student FICA determinations based on Revenue Procedure 2005-11 safe harbor guidelines. These guidelines consider factors such as the student's enrollment status, employment relationship, and the purpose of their employment in relation to their course of study.
International students on F-1 or J-1 visas in the United States are exempt from FICA taxes, regardless of their credit hour enrollment. However, they may still be subject to federal and state income taxes.
If your employer considers you an independent contractor or self-employed, you are responsible for paying your own income tax and self-employment tax. You may need to submit a Form SS-8 to determine your worker status and clarify your tax liabilities.
