University of Iowa fails to collect $417,000 in payroll taxes from student employees

About $417,000 will be collected retroactively from 2,718 students

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IOWA CITY — The University of Iowa has alerted more than 2,700 student employees a technical error caused the university to fail to collect $417,000 in payroll taxes over the summer.

“We are sorry for this error and any inconvenience this delayed withholding causes you,” Dan Schropp, UI director of payroll operations, wrote in an email to students late Thursday. “We understand that students have limited budgets, and the UI will remain flexible and sensitive to individual student needs.”

UI Payroll Services discovered earlier this month 2,718 student employees were not required to pay Social Security or Medicare taxes, also known as FICA taxes, for June and July, UI Spokeswoman Jeneane Beck said. Student employees taking at least three credits are exempt from FICA taxes, but the 2,718 students were not registered for at least three credits and should have had the taxes withheld.

Gross payroll for these students was about $5.5 million and the amount of FICA taxes due from student employees is about $417,000. Because the UI matches FICA tax on student employee income, the university also owes $417,000, Beck said.

Student employees will be required to repay their portion of the unpaid FICA taxes with deductions from the next three months’ of paychecks, according to Schropp’s email. If students owe $25 or less, the entire amount will be deducted from their next paycheck.

For students no longer working for the UI after the summer, “the university is being attentive to individual circumstances and is attempting to collect those funds from the student employees through methods agreed upon with the student,” the UI reported.

Students who want to see how much they owe may log into Employee Self Service, click on “Summer FICA 2017” and see both the total amount owed in taxes and the payments made so far. When looking at the details of your future paycheck(s), payments will appear as an after-tax deduction and will be labeled “Underpaid FICA”.

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