Are medical students really students if they make money?

It’s a Minnesota case that hit the U.S. Supreme Court today. The Mayo Clinic and the University of Minnesota do not want medical students working for them classified as employees because they’d be liable for half the Social Security and Medicare taxes.

An appeals court ruled last year that U.S. tax exception for students was meant only for those who worked part time while attending classes, but not medical residents, who are closer to full-time employees of the teaching hospitals to which they are assigned.

“How do you draw the line between a student who is working and a worker who is studying?” Justice Sonia Sotomayor said today, framing the question the court will have to answer after today’s hearing.

The Treasury Department argues, essentially, that if a medical student is working 40 hours in a hospital without having another doctor standing over him/her watching him/her, that’s not really a student, and his/her income should be taxed.

Sotomayor did not appear to buy Mayo’s argument that the students are learning, thus they are students, not employees.

“Aren’t you learning today — sitting here and watching this — maybe you are not — your own argument?” she told Atty. Theodore B. Olson. “Aren’t we learning in every case that we’re hearing? It’s — it’s, in my mind, difficult to separate out what makes a person or stops a person from learning on a job.”

Olson joked that the question shouldn’t matter to the Court because the justices do not pay Social Security taxes.

“You are not challenging that, are you, Mr. Olson?” Chief Justice John Roberts quipped.

Matthew Roberts, representing the Treasury Department, said if people are working long hours and making $40,000 to $50,000 a year, they ought to pay into a Social Security system which would help them if they were to become disabled on the job.

He offered no opinion on whether the Supreme Court should pay Social Security taxes.

(Here’s a transcript of today’s arguments.)

The University of Minnesota won a $45 million reimbursement from the federal government in 1998 for taxes paid on students’ stipends. After the award, the IRS adopted regulations excluding medical residents from the student exemption.

  • Jim Shapiro

    Like Michelle Bachmann’s foster parent career, it’s all ( or a heck of a lot of it) about tax status.

  • K

    Another thing to consider is that if residents are considered students, does that mean they can defer loans during residency?

    Right now, residents can only put their loans into forbearance during residency. The average medical school debt is $150,000 or more. That’s a big payment to make when you start your residency at $30,000 for family practice or $50,000 for some of the other specialties, even if it’s just the interest.

  • Kassie

    I want to know why the Supreme Court doesn’t have to pay into Social Security. They should have to just like the rest of us.