CONTACT: STEVE PARROTT
5 Old Capitol
Iowa City IA 52242
(319) 335-0557; fax (319) 335-0558
New IRS guidelines will mean more money in paychecks of some UI student
IOWA CITY, Iowa -- Some students who work for the University of Iowa
will be seeing a little more take-home money in their paychecks following
new guidelines issued recently by the Internal Revenue Service (IRS).
Under the new guidelines, most students who are enrolled at least half-time
are exempt from having FICA (Social Security) taxes withheld from their
checks. The usual employee contribution to FICA is 7.65 percent of the
The ruling will not affect all students who work for the UI. Most of
the UI's 7,800 student employees are already exempt from paying FICA withholding
on UI wages. Those who will see a little extra spending money are undergraduate
students who work more than 20 hours a week and graduate and professional
students who work more than 30 hours a week.
UI officials estimate that the new rules will affect about 18 percent
of student employees who are paid every two weeks and fewer than 3 percent
of those - mostly graduate assistants - who are paid monthly.
The ruling has no bearing on wages earned by students through non-university
New IRS guidelines generally provide that students who are enrolled
at least half-time and are not career university employees are eligible
for the student FICA exemption. In addition, there is no limit on the
number of hours worked.
Based on the new IRS guidelines, the UI has adopted a new policy for
defining student exemption from FICA taxes. Highlights of the policy include:
* Undergraduate students who work for the UI are exempt from FICA withholding
if they register for at least six hours during fall or spring semester,
or for at least three hours total during the three summer sessions (3-week,
6-week or 8-week sessions).
* Graduate and professional students are exempt from paying FICA withholding
on UI wages if they are registered for at least five hours during the fall
or spring semester or for at least three hours total during the three summer
* In addition, graduate students are exempt from FICA withholding on
UI wages if their department certifies on a registrar's form that they
are considered half-time even though their registration does not meet the
hour requirements. Also exempt from paying FICA withholding are graduate
students who have completed the comprehensive doctoral examination and
are currently enrolled.
* Students retain their FICA exemption during break periods of fewer
than five weeks, provided they were employed and eligible for the exemption
on the last day of the previous academic session and are eligible to enroll
during the next academic session. Those who are employed by the UI during
a session break exceeding five weeks are subject to FICA withholding.
* Students who are employed by the UI in both a job requiring student
status and a job not requiring student status are subject to FICA withholding
on both positions.
* Foreign students (non-resident aliens) employed by the UI are exempt
from FICA withholding by U.S. statute.
The UI's monthly payroll for student employees is about $3.3 million.