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IRS News
Affordable Care Act Tax Provisions-Updated July 7, 2011
The Affordable Care Act was enacted on March 23, 2010. It contains some
tax provisions that take effect this year and more that will be
implemented during the next several years. The following is a list of
provisions now in effect; additional information will be added to this
page as it becomes available.
Small Business Health Care Tax Credit
This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers.
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MedTax Letter-September 15, 2010
FICA Tax Refunds for Medical Students
A recent court ruling has determined that prior to April 1, 2005 medical residents should have been classified as medical students and therefore not subject to having FICA tax withheld from their paychecks. As a result, the IRS is honoring refund claims for any medical residents who paid FICA tax during that time. The IRS has begun contacting hospitals and universities who filed FICA (social security and Medicare tax returns) to begin refund claims for these periods with more information and procedures.
Why are FICA refunds being paid to medical residents and their employers?
Employers (typically hospitals and medical schools) and individual taxpayers (medical residents) began filing FICA refund claims in the 1990’s, based on their position that medical residents are students eligible for the FICA tax exception under Internal Revenue Code section 3121(b)(10). This 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. The employer’s FICA refund claims were for both the employer share and the employee share of the FICA tax. In some cases, individual medical residents filed their own claim for the employee share of the FICA tax. The IRS held the claims in suspense because there was a dispute as to whether the student FICA exception applied. The IRS has 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.
Who is eligible to receive a refund?
Institutions that employed medical residents and individual medical residents are eligible to receive refunds if they are covered by timely filed FICA refund claims. Individual medical residents can be covered under FICA refund claims they filed themselves or under claims filed by the institutions that employed them. These refund claims are subject to the same requirements that apply to all FICA refund claims including verification by the IRS of the amount of the claim and payment of interest.
If I am covered under a claim that my employer filed, do I need to do anything at this time?
No. You can expect your employer to be in touch with you about the refund process. You will not be hearing from the IRS directly.
Is my refund taxable?
Your refund will include your share of the FICA taxes plus interest. The refunded FICA taxes are not taxable; however, the interest portion of the refund is taxable to you. The interest is taxable whether or not you receive a Form 1099-INT, Interest Income, and must be reported on your individual income tax return.
If you believe you are affected by this recent change in legislation, I encourage you to contact the payroll department where you completed your training. As always, please feel free to contact me with any questions.
Eric Meyer
314.993.5551 or Toll Free 866.992.2175
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How to Report Identity Theft and Email Scams to the IRS
The IRS does not initiate taxpayer communications through e-mail.
* The IRS does not request detailed personal information through e-mail.
* The IRS does not send e-mail requesting your PIN numbers, passwords or similar access information for credit cards, banks or other financial accounts.
* Report suspicious e-mails and bogus IRS Web sites to phishing@irs.gov.
If you receive an e-mail from someone claiming to be the IRS or directing you to an IRS site,
* Do not reply.
* Do not open any attachments. Attachments may contain malicious code that will infect your computer.
* Do not click on any links. If you clicked on links in a suspicious e-mail or phishing Web site and entered confidential information, visit our Identity Theft page.
* Use the following steps to report the e-mail or bogus Web site to the IRS.
How to report phishing, e-mail scams and bogus IRS Web sites
If you receive an e-mail or find a Web site you think is pretending to be the IRS,
* Forward the e-mail or Web site URL to the IRS at phishing@irs.gov.
* You can forward the message as received or provide the Internet header of the e-mail. The Internet header has additional information to help us locate the sender.
* After you forward the e-mail or header information to us, delete the message.
Contact the Federal Trade Commission at 1-877-IDTHEFT (438-4338)
Visit the IRS Identity Theft resource page
You may also report misuse of the IRS name, logo, forms or other IRS property to the Treasury Inspector General for Tax Administration toll-free at 1-800-366-4484.
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