Turnabout is Fair Play: Payments by a Hospital to Former Residents in FICA Dispute are Subject to Indemnification

N.Y. & Presbyterian Hosp. v. United StatesThe Federal Insurance Contributions Act (“FICA”), I.R.C. §§ 3101-3128, requires employers to deduct a tax from the wages paid to employees, but it has an exception for wages paid to students. See I.R.C. § 3121(b)(10). For a number of years, the question whether medical residents qualified for this exception was disputed. The official position of the IRS was that medical residents did not qualify for the student exception, but it allowed both residents and hospitals to file protective refund claims. Then on March 2, 2010, the IRS issued an announcement that it would honor refund claims previously filed for periods prior to April 1, 2005, when a relevant regulation took effect.… Read More