Student FICA Exemption Process Overview
Students employed at the University meeting specific requirements are eligible for a FICA exemption. Regulations apply to undergraduate students based on number of registered credits. Regulations for graduate student specify student level, number of credits and type of graduate assistantship.
University interpretation of the Student FICA law requires that a determination of exempt eligibility status be performed prior to each payroll processing for student employees. An interface between the student system database and SAP will provide the required decision criteria and create an Infotype 9235 to store the data. In addition to fields containing student type, level and credit hours, a check box to indicate registration status will be included on Infotype 9235. Since this analysis will be completed prior to each payroll run, the accuracy and integrity of the exemption will be maintained.
Once Infotype 9235 has been created with the appropriate data, logic inside a function module (inserted into the payroll schema) will determine if the student is eligible for the exemption during payroll processing. If a student is eligible, negative amounts of FICA taxable (Employee and Employer Social Security and Medicare) will be stored in the results table to negate the positive taxable amounts stored in wage types /403, /404, /406 and /406. If the taxable amount is zero, no tax will be assessed.
Report output from the interface will indicate if errors occurred during Infotype creation or editing. An Ad Hoc Query will be created to identify Grad Students who are enrolled but haven’t registered. The Enhanced Logged Infotype Change report will be used to indicate which student record was changed. Students who continue to work at the University during the summer and and don’t carry enough credit hours will lose their exemption. That is easily managed by SAP.
If a need arises to manually create or edit Infotype 9235, Payroll Office Staff will have security rights to do so. Today there are situations where the exemptions are manually maintained, such as Grad students in their last semester. An excel spreadsheet will be created to continue the review of the student’s record until actual graduation and termination of employment.
Departments can identify candidates eligible for tax exemption based on University policy.
Student FICA Exemption Process Flow