UPDATE (8/30/2013): Vanderbilt has now submitted payment information for refund checks to be printed and mailed. The majority of the refunds will be disbursed from First Tennessee Bank (FTB) as trustee, but there will also be some refunds disbursed directly from Vanderbilt. Some recipients will receive multiple checks from both First Tennessee Bank AND/OR Vanderbilt, depending on the tax years involved for each individual. Letters explaining the checks and certain tax issues are also being mailed to check recipients, but in separate envelopes. These letters should arrive before the checks themselves. In resolving the FTB trust accounts, Vanderbilt is pleased to report that it has reimbursed the trust accounts for over $275,000 to cover trustee fees that had been charged to the trusts over the past several years. This will increase the individual refund amounts from what they would have been. This move on Vanderbilt's part was not required, but was done as a good faith measure to the former residents. The exact timing of when FTB will print and mail the checks is not known, but they have indicated it may take up to three weeks in order to print and mail the approximately 2,100 checks that they have to disburse. Checks coming directly from Vanderbilt (approximately 950) will be printed and mailed much sooner, targeting no later than Sept. 6.
After years of litigation in various courts across the US, the IRS has made the determination that medical residents are exempt from FICA taxes for the tax periods ending before April 1, 2005. Based on a position that medical residents are exempt from FICA tax as students under an exception in Internal Revenue Code section 3121(b)(10), some employers (typically hospitals and medical schools) and individual taxpayers (medical residents) began filing FICA refund claims in the 1990's. This exception is referred to as the student exception and may apply to a student at a school, college or university who is also an employee of that school, college or university. As this position had not been applied to medical residents before, and the IRS was not refunding such claims by asserting that medical residents were employees (and not students), there was considerable uncertainty as to whether the student exception would prevail. Lawsuits filed by institutions seeking to enforce FICA refund claims were vigorously fought by the Department of Justice with mixed results. For those years that an employer filed a refund claim, the claim includes two parts; the first part is the employer's FICA tax, and the second part is the employee's FICA tax. The IRS held the claims in suspense because there was a dispute as to whether the student FICA exception applied. In March 2010, the IRS announced that it had made an administrative determination to accept the position that medical residents are exempt from FICA taxes for tax periods ending before April 1, 2005, when new IRS regulations went into effect.
On April 1, 2005, new regulations regarding the student FICA exception became effective. One part of these regulations states that an employee who works 40 hours or more (full-time employee) for a school, college or university is not eligible for the student exception. This part of the regulations excludes medical residents from the student exception. However, the United States Supreme Court has agreed to hear a case involving the validity of the IRS's regulations regarding the student FICA exception and medical residents. The outcome of this case may create additional opportunities for refunds for periods after April 1, 2005.
The IRS has created a ‘Questions and Answers’ webpage which may help answer any technical questions you may have about FICA taxes in general, and more details about these refunds. Here is the link: http://www.irs.gov/charities/article/0,,id=219547,00.html .
Vanderbilt has filed and received refund claims, in part or in whole, for years 1996 through the first quarter of 2005, at which time new regulations came into effect. For years 1996-2000, refunds to past medical residents have already been issued to those for whom consents have been received, and are still available for those who could not initially be located. If you think you are eligible for a refund for years 1996-2000, but were not contacted, please see the What to do section below in order to initiate your refund for those years. For 2001, Vanderbilt’s original claim was denied, but a protective claim was filed. If the 2001 claim is eventually honored by the IRS, and a refund is received, refunds will be processed to the extent that consents have been received from former medical residents. For years 2002-2005(first quarter;Q1), Vanderbilt has received refunds, and set aside the employee (medical resident) portion of the FICA refunds in separate trust accounts, with a regional bank designated as trustee. The refunds received for 2002-2005Q1 were only for those residents for which consents had been received. If you think you are eligible for a refund for years 2002-2005Q1, but have not been contacted, please see the What to do section below in order to initiate your refund for those years. These funds have not yet been disbursed, but the process to make these funds available for disbursement has begun.
Vanderbilt’s next steps involve further mailing of consent forms, thus allowing disbursements to former residents for claims already received from the IRS, and allowing Vanderbilt to claim refunds for residents for which refunds have not yet been received. Signed consents are necessary in order for refunds to be claimed.
By tax year, the process will be as follows:
The consents and form letters will be mailed at the end of September, with a mandatory response date of Saturday, October 30, 2010. Refunds can only be claimed and processed after a signed consent form is received by Vanderbilt.
If you receive a consent form in the mail, please fill it out and return it by October 30, 2010. If you believe you are eligible for a refund for tax years 1996-2005Q1, but have not been contacted, nor returned a signed consent form, you can download a consent form here, fill it out, and mail it to the address on the form by the deadline. A copy of the cover letter sent with the form is available here.
If you have further questions not addressed above, you may email Vanderbilt at firstname.lastname@example.org .