IRS review of U’s tax records brings welcomed refunds

by Heather Fors

University accountants and the Internal Revenue Service will audit the school’s tax records in coming months to fix problems with student employee payments to the Social Security trust fund.
School officials expect the review of the University’s books to bring student workers hefty checks for taxes that were wrongly withheld from their paychecks. The University could also retrieve a sizable sum for money it paid in FICA taxes from 1995 to 1997.
At a Board of Regents meeting earlier this month, Terry O’Connor, interim vice president of finance, said officials are expecting a refund for the University in the low seven figures. In an interview Monday, O’Connor refused to give an estimate, saying officials had not yet “quantified a number.”
At the regents meeting, O’Connor said eligible students could get back hundreds of dollars each for wrongly assessed Social Security taxes. The board gave administrators the go-ahead to retrieve the money because of its direct impact on students, said Regent Bob Bergland.
But students shouldn’t count on the cash just yet.
“Many of these tax disputes last a long time,” said Mark Rotenberg, the University’s general counsel. He likened the situation to one involving the Medical School, which has been trying to recoup taxes for eight years.
“I wouldn’t go buy a car on this,” Rotenberg said.
The issue arose in January when the IRS declared that students are FICA exempt if they are undergraduates taking six or more credits and graduates taking four or more credits. Students also had to work at least 20 hours a week at an on-campus job.
Prior to this declaration, the IRS’s rules on exemption for students were unclear.
For students who paid these taxes during the last few years, the University will file one claim, which would incorporate the portion it is seeking with the portion students might get back.
Students will be notified and can then file for these taxes with the University. The school will keep students updated on the progress of the case. The money will be distributed based on a fair assessment of how much was deducted from the checks of each student.
Those students whom officials can’t track down will have to file on their own.
Rotenberg said he is unsure of how the University will use its portion of the refund.