FICA Taxation of Students
Under current IRS Tax Code, students who are degree candidates and who are "enrolled and regularly attending" courses are exempt from FICA withholding on wages paid for university employment which is incident to and for the purpose of pursuing a course of study. The IRS has indicated that registration must clearly demonstrate that student status is primary and employment status is secondary, and that universities must have policies for deciding when to exempt student employees from FICA. Accordingly, students who are classified by the Dakota State University as being at least half time will be exempt from FICA if eligibility for the employment requires student status.
Undergraduates attain half time status with 6 registration hours during fall and spring sessions, or 3 registration hours during the summer session. Nonresident aliens present in the United States on an F-1/J-1 visa and employed by the University are exempt from FICA withholding by U.S. statute. Eligible persons must sign and complete documentation at the Human Resources Office.
The IRS has recently clarified this exemption in Rev. Proc. 98-16. The FICA exemption does not apply to a student employee who is not enrolled in classes during school breaks (including summer breaks) of more than five weeks. For hours worked during breaks of less than five weeks, the student must have been enrolled in the prior term and be registered in the succeeding term. The exemption also does not apply to students deemed to be "career employees" as defined by IRS.
The Payroll Office will monitor the enrollment status on a pay period by pay period basis and make any modifications to the exemption status necessary for each pay period.