The decision affects all higher learning institutions by more clearly defining a provision in the federal tax code. Non-exempt employers and employees each must pay 7.65 percent of earned wages into the FICA tax base, which accrues money for Social Security and Medicare. Elizabeth Nunnally, University Business Services taxes director, said that although the ruling should be helpful to all colleges, large public institutions such as the University will benefit most from these new FICA exemption rules.
Employers pay the percentage on top of earned wages while employees pay it out of their wages.
The new exemption parameters could save the University millions of dollars. Savings to the students are also significant, Nunnally said. Previously, the IRS exempted students who were enrolled and regularly attending classes, but did not define how many credits a student had to take to qualify. Some schools took the definition to mean students taking at least one class. The IRS also required students to work less than 20 hours a week to be exempt.