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October 05, 2010

Mayo Clinic vs IRS going to Supreme Court

Here's some from a piece I cobbled together for today's paper about the ongoing saga of Mayo Clinic's war against the U.S. government over whether medical residents are students or employees.

When Mayo Clinic and the University of Minnesota make their case to the Supreme Court that medical residents are students and not employees, the court's newest justice will not be listening.

Elena-kagan1-1 Elena Kagan, who officially joined the Supreme Court this week as a justice, recused herself from the case brought by Mayo and the university to appeal a ruling by the Eighth U.S. Circuit Court of Appeals.

As President Obama's solicitor general, Kagan filed a brief supporting the government's position that medical residents don’t qualify for the general student exemption from Social Security taxes.

That was why she stepped back from hearing this case, along with 24 other of the 51 cases on the court's docket this session.

In the medical residents case, Kagan argued that the court of appeals decision was correct and a review by the Supreme Court was "not warranted."

  Her brief stated that the ruling against Mayo Clinic and the U of M "resolves the uncertainty and controversy over the application of FICA taxes" and "provides an easily administratable bright-line test."

Kagen also noted that the student exemption is "an issue of significant 800px-Gonda_building,_closer_up administrative and fiscal importance to the Treasury, involving as much as $700 million annually in FICA taxes for medical residents alone."

The Social Security tax represents 12.4 percent of wages. Half of the tax is paid by the employer and half by the employee. For a medical resident earning a $50,000 stipend, that represents $3,100 paid by the resident and $3,100 paid by the hospital.


Well, if they get a paycheck aren't they an employee? Otherwise why would they get a paycheck.

It's called a stipend. Many college students get one as a part of their studies/financial aid/scholarship package.

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