Social Security:

Coverage for Medical Residents

HEHS/GGD-00-184R: Published: Aug 31, 2000. Publicly Released: Aug 31, 2000.

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Pursuant to a congressional request, GAO reviewed a court ruling that exempted certain medical residents from paying Federal Insurance Contributions Act taxes and Social Security coverage, focusing on: (1) how the Internal Revenue Service (IRS) and the Social Security Administration are proceeding since the court decision; and (2) what decisions IRS has made about refunding taxes for social security paid by medical residents and their employers and the effect of those decisions on the Social Security Trust Funds.

GAO noted that: (1) IRS completed assembling its guidelines in April 2000 for how its employees should respond to the refund applications received since the court decision; (2) any determinations about refunds had been placed on hold until these guidelines were in place and IRS had trained its revenue agents to apply the guidelines, which was done in July 2000; (3) under the IRS guidelines, which clarify existing agency policy, refund decisions will continue to be made on a case-by-case basis, by considering a variety of facts; (4) for example, determining whether a medical resident qualifies for an exception as a student will depend on such factors as whether the residency program includes regularly scheduled lectures and classroom time, evaluation by faculty members based on academic standards, and student benefits such as health insurance, housing, and discount event tickets; (5) under these guidelines, it is possible that decisions about exemptions will vary even among residency programs at the same institution; (6) now that the guidelines are in place and revenue agents are trained, IRS expects to resume considering refund claims; (7) however, because each claim will involve weighing a complex set of factors, IRS has no estimate of when the first cases will be completed; and (8) in addition, it is impossible to know at this point how many refunds IRS will make or what effect such IRS decisions will have on the Social Security Trust Funds.

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