CMS Provides Instructions for Teaching Hospitals Regarding Refund of Medical Resident Medicare FICA Taxes

Medical Resident

The Centers for Medicare and Medicaid Services (CMS) recently issued a MLN Matters article with instructions for teaching hospitals regarding refund of medical resident Medicare FICA taxes. The article informs teaching hospitals and Medicare contractors of the proper way of reporting Internal Revenue Service (IRS) Refunds of Medicare FICA taxes on cost reports. According to the article, teaching hospitals must work with their Medicare contractor to make any necessary changes by January 30, 2012, to their Fiscal Year (FY) 2009 cost reports to be used in the FY2013 wage index.

On March 2, 2010, the Internal Revenue Service (IRS) made an administrative determination that medical residents are exempt from FICA taxes based on the student exception for tax periods ending before April 1, 2005. Recently, the IRS began contacting hospitals, universities, and medical residents who filed FICA (Social Security and Medicare tax) refund claims for these periods.

The MLN Matters article reviews the proper way for teaching hospitals to report the FICA refund for medical residents on the Medicare cost report. The FICA refund must be reported in such a way that it does not impact a hospital’s wage-related costs used to compute the wage index under the Hospital Inpatient Prospective Payment System (IPPS). Follow the link below to review the instructions in detail.

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