Withholding of FICA Taxes for Student Employees Policy : University of Dayton, Ohio

Withholding of Federal Insurance Contributions Act (FICA) Taxes for Student Employees Policy

Purpose

This policy provides an overall framework for the University's withholding of FICA taxes on student employees.

Scope

This policy applies to all student employees of the University.

Policy History

Effective Date: February 26, 1996

Approval: December 1, 2025

Policy History:

Approved in original form: February 26, 1996
Approved as amended: July 24, 2000
Approved as amended: June 28, 2016
Approved as amended: December 1, 2025

Maintenance of Policy: Executive Director of HRIS and Payroll Services, Office of Human Resources

Definitions

Undergraduate Students, Half-time Status

September & January Terms – 6 credit hours
May & June Terms – 3 credit hours

Graduate Students, Half-time Status

September & January Terms – 3 credit hours
May & June Terms – 1.5 credit hours

Policy

The Internal Revenue Service has established rules which require FICA taxes to be withheld on all employees. However, Section 3121 (b)(10) provides an exemption for students enrolled at least half time and regularly attending classes at the school, college or university by which he/she is employed. The IRS has ruled that the determination of a student's exemption must be on a case-by-case and term-by-term basis. This determination is made whether a student's employment is incident to the course of study and whether the student is, at the time of employment, at least a half-time student. While IRS interpretation is not established by regulation, the IRS has recommended that any student who carries 6 or more credit hours and is employed fewer than 20 hours per week should be granted relief from FICA tax.

The University will comply with all IRS guidelines and service policies and will follow these policies to every extent practical.

Reference Documents

1. 26 CFR Section 31.3121(b)(10)

Appendix A: Procedure

In order to comply with IRS requirements regarding withholding of FICA taxes for student employees, the following guidelines have been established:

The University will withhold FICA tax from all students, graduate or undergraduate, who are not attending class on at least a half time basis at the time of their employment.

The University runs a process prior to each payroll, except during semester breaks that are less than 5 weeks (e.g., between Fall and Spring terms), which validates student enrollment and will update the student’s FICA status accordingly. The FICA status is changed to EXEMPT if the student is enrolled for a minimum of 6 credit hours for Fall and Spring terms or a minimum of 3 credit hours for either Summer term. If the student is not enrolled or enrollment is less than the minimum number of credit hours required, the FICA status is changed to ACTIVE and FICA taxes are deducted.