NORTH CAROLINA AGRICULTURAL AND TECHNICAL
STATE UNIVERSITY
DIVISION OF BUSINESS AND FINANCE
University Payroll Office
EXEMPTION FROM SOCIAL SECURITY WITHHOLDING TAX
 
A. Purpose:

This Statement outlines the requirements and procedures for University employees to be eligible to claim exemption from the social security (FICA) withholding taxes.

B. General Guidelines/Applicable Policies:

Generally, wages of all University employees are subject to the social security withholding tax. This tax is calculated as a percent of gross pay and has an annual wage ceiling. The percent and wage ceilings change periodically.

1. Student Exemption

a. Internal Revenue Procedure 98-16 indicates, "An individual who is a half-time undergraduate or a half-time graduate or professional student and who is not a career employee will qualify for the student FICA exception …with respect to services performed at or for institutions of higher education in which they are enrolled…" The procedure further indicates that a student registered for less than half-time in their last semester, who is registered for sufficient hours to complete their degree would also qualify for the exemption.
       
      A student who is classified as a "career employee" is not generally eligible for the exclusion, since their employment is not incident to and for the purpose of pursuing a course of study. The general definition of a "career employee" is an individual who is:
       
      1. eligible to participate in a section 401 or 403(b) retirement plan or would be eligible if age and service requirements were met,
      2. eligible for reduced tuition because of the individual's employment relationship with the institution, or
      3. classified by the institution as a career employee.

    b. The half-time status is determined at the end of the drop-add period. (6 credit hours of course study per semester is considered half-time.)


    c. The FICA exception does not apply to students who are not enrolled in classes during school breaks of more than 5 weeks (including summer breaks of more than 5 weeks).
Students who work during the summer and are not enrolled for the summer sessions are not exempt from FICA
  d. Certain students who are "Non Resident Aliens" may be exempt from FICA. (See 2. VISA Exemption below.)  
  1. VISA Exemption.
Special rules apply to Non Resident Aliens with acceptable VISAs.

A "Non Resident Alien" is a person who is not a citizen of the United States who has been admitted to the country for a temporary stay that will end when the purpose of that stay has been met.

Non Resident Alien students on F-1 or J-1 VISAs are exempt from social security tax for 5 and 2 years respectively from their date of entry into the U.S. H-1 and J-2 VISA holders are subject to social security tax withholding unless an exemption can be made based upon "student status".