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A friend of mine in the U.S.A. works for an employer who, we believe, improperly withheld FICA (should have been exempt: they are a student at the same university that they work) due to an administrative error.

We believe the FICA will be refunded, but, could one request interest be paid in addition to the original sum because it was an error on their part? If so, how would the interest rate be calculated?

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  • One possible reason for such a confusion is that as I understand it, to be exempt from FICA, you must be enrolled at the university in the same term that you are working. In particular, I know from experience that if you are enrolled as a student in the spring and fall terms, but work over the summer without taking classes, FICA is withheld. If there actually was an error, consider that interest rates are currently so low that even if you did get interest, it would likely not amount to more than a couple of dollars.
    – Nate Eldredge
    Sep 10, 2014 at 3:51
  • @Joe: You will be lucky to get the FICA taxes back, let alone the interest.
    – user102008
    Sep 10, 2014 at 23:17
  • @NateEldredge: Or, if you are a nonresident alien. Then any allowed income should be exempt from FICA.
    – user102008
    Sep 10, 2014 at 23:18

1 Answer 1

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Joe, A student is only exempt from paying FICA taxes if he/she is employed by an university, where this students is enrolled and attends classes on a regular basis. If this is not the case with your friend, then they indeed have to pay FICA.

Otherwise, you just answered your own question - "how would the interest rate be calculated"? Would you have to determine monthly principal (FICA collected) and applicable interest rates for that month? Should these balanced be calculated on a weekly or bi-weekly basis? Either way, it is not the error on the IRS part, but your friend's university, and I would be hard-pressed to learn that they would consider paying your friend any interest...

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  • Thanks for your response. Friend is employed by the university at which they are enrolled full time.
    – Joe
    Sep 9, 2014 at 22:55
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    "A student is only exempt from paying FICA taxes if he/she is employed by an university" That's not the only case. All legal employment income for an F1 or J1 who is a nonresident alien is exempt from FICA. irs.gov/Individuals/International-Taxpayers/…
    – user102008
    Sep 10, 2014 at 21:38
  • The initial question lacked details, and I assumed that the student was a US resident alien.
    – Excel Strategies LLC
    Sep 10, 2014 at 22:12
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    @ExcelStrategiesLLC: International students are much more likely to be nonresident aliens than resident aliens because students are exempt from the Substantial Presence Test for the first 5 calendar years (and most student programs are only a few years long).
    – user102008
    Sep 10, 2014 at 22:56

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