Employee FICA Exemption - 306.2
|University of Arkansas at Little Rock|
|Policy Name: Employee FICA Exemption|
|Policy Number: 306.2|
|Effective Date: May 1, 2010|
To inform UALR employees and other UALR related individuals about relevant tax issues regarding the student employee FICA exemption.
The University will make student FICA determinations based on Revenue Procedure 2005-11 safe harbor guidelines; that is, those student employees who meet these guidelines will be treated as exempt from FICA taxes, while those student employees who do not will be subject to FICA taxes on their wages. This policy does not constitute legal or tax advice and individuals should consult with their attorney or tax professionals for advice on personal issues.
A student qualifies for the student FICA exemptions on UALR earnings if the student meets all of the following criteria:
- Enrolled in classes creditable towards a degree, certificate or other recognized educational credential at the school, college or university in which they are employed.
- Registered for at least half-time during the Fall, Spring, or Summer terms.
- Not a full-time employee.
- Not a professional employee. A professional employee is defined as an employee whose work: (i) consists of advanced or specialized knowledge; (ii) requires consistent discretion and judgment; and, (iii) is intellectual or varied rather than routine, manual, or physical. Another indication of a professional employee is if a license (other than a normal driver’s license) is required.
- Not eligible for employment benefits (unless the benefits are mandated under state law).
- The employee’s primary relationship with the institution that employs him or her must be as a student and secondarily as an employee.
The student FICA exemption is eligible for work performed during school holidays and breaks between academic periods if (i) the break is less than 5 weeks long; and (ii) the student is enrolled or eligible to enroll in the first academic period following the break. However, if the break is longer than 5 weeks or the student is not enrolled or eligible to enroll in the next academic period, the student will not be eligible for the FICA exemption but may keep their student assignment category. Therefore, it is possible (or even probable) that a student employee will have some wages that were subject to FICA taxes and some wages that were exempt from FICA taxes during the same year.
This policy applies only to compensation payments; it does not apply to scholarship or fellowship payments.
Source: Internal Revenue Code Section 3121(b)(10); Revenue Procedure 2005-11, May 1, 2010; Initial Policy
Approved By: Robert Adams, VCFA, May 1, 2010
Custodian: Office of Finance & Administration