The FICA Exemption for Student Employment at the University of Wisconsin
During the academic term, most undergraduate and graduate students employed by the University of Wisconsin System (UW) are exempt from federal Social Security and Medicare taxes. Under the Internal Revenue Code, students are exempt from Medicare taxes if their employment is "incidental to their pursuit of a course of study" or "incidental to the employment of a university or a college". The following information describes the rules and guidelines for determining eligibility for student employment.
To qualify for FICA exemption, the student must be enrolled in the university for at least a half-time academic workload. This enrollment requirement varies by college and discipline. Undergraduate students are generally exempt from FICA for up to 20 hours a week, whereas graduate students are generally exempt from FICA for 6 hours a week. During breaks of less than five weeks, the student is also exempt from FICA. In addition, a student's employment is generally incidental to their pursuit of a course of study if the student works with the university on a normal work schedule. However, a student's employment is not considered incidental if the student is paid a stipend or receives payment for services performed.
A half-time student is an undergraduate or graduate student who is enrolled in at least 6 credit hours. The student is enrolled in the number of credit hours required to complete their degree program. For graduate students, the number of credit hours required to complete their graduate program may vary. Graduate students are generally exempt from FICA if they are enrolled in a minimum of 12 units for fellowships. Graduate students who are registered for less than two credit hours are not eligible for student FICA exemption. Graduate students must register for a minimum of 10 credit hours during the autumn, winter, and spring quarters. Graduate students working as teaching assistants are required to register for a minimum of 10 credit hours. Graduate students working as research assistants are required to register for at least two credit hours during the summer quarter. Graduate students working as postdoctoral research associates are not eligible for student FICA exemption.
Students who are non-resident aliens are generally exempt from FICA and Medicare tax withholding if they are on an F-1 or J-1 visa. This visa status may also exempt students from Medicare tax withholding based on the length of the student's stay. In addition, medical interns and postdoctoral research associates are not covered by the safe harbor guidelines.
Students who have changed enrollment are not subject to retroactive FICA tax charges. Students who have changed enrollment must provide documentation that shows their student status for the year. The document must also demonstrate that the employment was incidental to the student's pursuit of a course of study. The document should also include information on the student's wages on which FICA was withheld. If the information is incomplete, the student will be subject to FICA tax withholding.
Student employees are typically identified as student assistants or student help. These employees must be enrolled at least half-time and must be working less than 80% of the month. Students must also be regularly attending classes and must have an appointment percent of less than 80%. The relationship between the student and the employer must be primarily educational. If a student employee's enrollment or appointment percent changes during a term, the university will review their eligibility for student FICA exemption.