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HEHS/GGD-00-184R 1 (2000-08-31)

handle is hein.gao/gaocrptaltg0001 and id is 1 raw text is: United States General Accounting Office Health, Education, and Washington, DC 20548 Human Services Division B-284947 August 31, 2000 The Honorable E. Clay Shaw, Jr. Chairman, Subcommittee on Social Security Committee on Ways and Means House of Representatives Subject: Social Security: Coverage for Medical Residents Dear Mr. Chairman: In 1998 a federal court ruled that the University of Minnesota was not liable for Social Security contributions for wages paid to certain medical residents as part of their residency training. The court ruled, in part, that these medical residents met certain criteria to be considered students and therefore qualified for an exception to paying Federal Insurance Contributions Act (FICA) taxes and Social Security coverage. This ruling generated a number of applications for tax refunds to the Internal Revenue Service (IRS) by medical residents and by medical institutions that pay the employer's share of Social Security. As of April 7, 2000, medical residents and their employers had submitted 228 claims for refunds totaling more than $162 million. The Social Security Administration (SSA) estimates that if all the medical residents in the country were exempt, the loss to the Social Security Trust Funds over the next decade could be in the billions of dollars. You asked us to provide information about (1) how IRS and SSA 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. We interviewed IRS and SSA headquarters officials to obtain information on the laws, regulations, and policies applicable to medical residents and how IRS and SSA have been implementing them. Our review was conducted between February and August 2000 in accordance with generally accepted government auditing standards. In brief, IRS, the agency responsible for collecting taxes for Social Security, completed assembling its guidelines in April 2000 for how its employees should respond to the refund applications received since the court decision. 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. Under the IRS guidelines, which clarify existing agency policy, refund decisions will continue to be GAO/HEHS/GGD-00-184R Social Security: Coverage for Medical Residents

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