I am pleased to announce that the IRS has issued new guidelines regarding the exemption from social security withholding for student employees. These new guidelines are much more definitive than those provided in the past and are part of Revenue Procedure 98-16. Basically, in addition to eliminating the restriction that a student could not work more than 20 hours per week to qualify for exemption from social security withholding, the new guidelines provide that:

1. To be exempt from social security withholding, a student must be enrolled at least half time. (In the past a student had to be enrolled full-time.) Half time enrollment at NC State is defined for undergraduate students as enrollment in 6 or more credit hours during regular semesters (i.e., spring and fall) and 3 or more per summer session and for graduate students as 3 or more credit hours during regular semesters (i.e., spring and fall) and one credit hour for each summer session.
2. Students who are enrolled less than half-time but who are in their final semester and enrolled in the number of credit hours needed to complete their degree requirements, qualify for an exemption from social security withholding.
3. Additionally, although not specifically provided for within the new IRS guidelines but determined to be within the spirit of the new regulations by NC State University, graduate students enrolled in GR598 or GR698 as well as those enrolled in GR697, will also qualify for an exemption from social security withholding. Previously, an exemption was only provided for enrollment in GR697.

Exemption from social security withholding as identified in (1) above will automatically be provided and accomplished through the routine matching of the payroll files to the student registration files. An automatic exemption will also be provided to all graduate students on official monthly graduate appointments. [NOTE: An official monthly graduate appointment is defined as a graduate teaching assistantship, research assistantship, services assistantship, or fellowship.] As you might expect, both of these automated exemptions will require programming changes. As of this writing, the requisite programming changes have not yet been implemented. Once they have been, we will notify you and begin to issue refunds automatically to those students we are able to identify programmatically as being eligible for exemption retroactive to the first pay period of the Spring 1998 semester for whom we have been withholding. We anticipate that the necessary programming changes will be in place prior to the end of the spring semester and that we should be issuing refunds in the very near future.

Exemptions provided for in items (2) and (3) must be initiated by having the student complete and submit Form PYRL02, NC State University Enrollment Exceptions for Student Social Security Exemption (copy attached), to the University Payroll Office. Form PYRLO2 also will provide an exemption from social security withholding for students in the instance indicated below.

• * Half time enrollment at another UNC system school; official proof of current semester enrollment must be attached. The official proof must have some type of identifying symbol of that school and show the current semester's hours.

If a student meets any of the exception criteria indicated above and brings a properly executed PYRLO2 form to the University Payroll Office, we will issue a one-time refund of social security taxes withheld retroactive to the first pay period of the Spring 1998 semester or later, as appropriate on the next available payroll after receipt of the form.

Note: Students on F1 and J1 visas will continue to be exempt for 5 years from date of entry without regard to the number of enrolled credit hours.

If you have any questions, please contact Brian Simet, Director of Payroll, or Franki Senter, Tax Manager.