Worker Classification and Employment Taxes
p. 697. Insert following existing material:
§ 27.7 MEDICAL RESIDENTS AND THE STUDENT EXCEPTION (NEW)
Medical residents are physicians who have finished medical school and internship and are receiving training in a specialized area of medicine, such as surgery, internal medicine, or radiology. They typically perform their duties as a full-time employee would; indeed, usually working far more than 40 hours per week. Under the Federal Insurance Contributions Act (“FICA”),51 employees and employers are required to pay taxes on all “wages” that employees receive. FICA defines employment as “any service … performed … by an employee or the person employing him,” but excludes from taxation services that are performed “in the employ of … a school, college, or university … if such service is performed by a student who is enrolled and regularly attending classes at (the school).”52
The Treasury Department had historically construed this “student exception” as applying to students whose work for their schools “is incident to and for the purpose of pursuing a course of study.”53 In 2005, new Treasury Department regulations took effect that expressly took the position that medical residents whose normal schedule requires them to perform in excess of 40 hours of work per week are not students for purposes of the exception from FICA taxes.54
This position was challenged in ...