Services in the employ of certain higher education institutions, performed by a student, qualify for the exception from FICA tax.


Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(ii).  MBC files Form 990 and Form 990-T annually.

The Accounting team at MBC emailed us to ask about the “Student FICA Exception.”  We tell them that services performed for MBC by “students” (one who is a half-time undergrad or graduate student) will generally not be subject to FICA tax.  And, there is a recent IRS “issue snapshot” that covers this issue.

We also told them that, if the IRS audits their records in this area, they would review your documentation that shows the students qualify for the FICA exception. The IRS would check to see that this information is sufficient to show that the student employee had the status of a student and the portion of the year that this status was held. In addition, they would need to know when the student worked during the year.


From IRS Federal, State & Local Government “Issue Snapshot” Student FICA Exception

(Dated 9/10/17):



In general, FICA tax applies to wages paid to an employee on account of employment. IRC Section 3121(b)(10) excepts from FICA tax service performed in the employ of a school, college, university (institution), or a section 509(a)(3) organization organized and operated exclusively for the benefit of that institution if the service is performed by a student who is enrolled and regularly attending classes at the institution.

The student FICA exception does not apply to services which are covered by an agreement to provide social security coverage under section 218 of the Social Security Act (section 218 agreement). IRC Section 3121(b)(7) (E). A section 218 agreement may apply to students at a secondary school, as well as to students at an institution of higher education.

The exception applies only to an employee who has the status of a student.  An employee who performs services “as an incident to and for the purpose of pursuing a course of study” at the institution for which the services are performed has the status of a student for this purpose. Section 31.3121(b)(10)-2(c).

Rev. Proc. 2005-11, 2005-1 C.B. 307, sets forth new guidelines for determining an educational institution and whether an individual is a student at an institution of higher education (institution) for purposes of the student FICA exception. In brief, an individual who is a half-time undergraduate student or a half-time graduate or professional student (half-time student) will qualify for the student FICA exception, provided that the individual is not a professional employee of the institution. The meaning of these terms is as follows. [Underline added.]

In addition to being an “institution of higher education”, the employer must be a school, college, or university (SCU) within the meaning of section 3121(b)(10). The SCU primary function is the presentation of formal instruction, it normally maintains a regular faculty and curriculum, and it normally has a regularly enrolled body of students in attendance at the place where its educational activities are regularly carried on. (Treas. Reg. Section31.3121(b)(10)-2(c)). It may also be an affiliated Section 509(a)(3) organization with respect to the SCU.

Under Rev. Proc. 2005-11 Section 6.03, services performed by professional employee, is not eligible for the student FICA exception. A professional employee is any individual performing services for an institution who:

  1. Is eligible for vacation, sick leave, or paid holiday benefits;
  2. is eligible to participate in any retirement plan described in section 401(a);
  3. is eligible to receive an allocation of employer contributions other than contributions described in section 402(g) of the Code under an arrangement described in section 403(b);
  4. is eligible to receive an annual deferral by non-elective employer contributions under an eligible deferred compensation plan described in Section 457(b), or would be eligible for such annual deferrals if plan requirements were met, or if contributions by salary reduction were made by the employee to a plan described in Section 457(b);
  5. is eligible for reduced tuition (other than qualified tuition reduction under section 117(d)(5) of the Code, provided to a teaching or research assistant who is a graduate student;
  6. is eligible to receive one or more of the employment benefits described under sections 79 (life insurance), 127 (qualified educational assistance), 129 (dependent care assistance programs), and 137 (adoption assistance).



  • FICA tax applies to wages paid to an employee on account of employment.
  • There is an exception in the Internal Revenue Code for services performed for certain schools by “students.”
  • “Students” are defined as one “who is enrolled and regularly attending classes at the institution. (A half-time undergraduate or graduate will qualify.)
  • Services by a “professional employee” will generally not qualify for the exception.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.