Doctors sue Children's Hospital over taxes the IRS now says shouldn't have been withheld from them when they were residents

Two doctors who did their residency at Children's Hospital say the hospital owes them and hundreds of other doctors thousands of dollars apiece in improperly withheld taxes between 1995 and 2005.

In a lawsuit filed last week in Suffolk Superior Court, Dr. Danette Colella, now in practice on the South Shore, and Dr. Cara Barone, now in practice in California, say the problem is not that Children's withheld taxes from them in the first place but that when the IRS issued a ruling that medical residents and fellows were not subject to withholding for the period when they were residents, the hospital failed to apply for refunds for all of the covered years, failed to let them know in time they were even due refunds and had its application for refunds for two years rejected for failing to provide all the required paperwork.

In addition to their specific complaints, the two are seeking to be named lead plaintiffs in a class-action lawsuit against Children's.

The IRS had long battled some hospitals over the issue of whether medical residents and fellows were employees subject to withholding of Social Security and Medicare taxes - the IRS position - or students exempt from it. During the period, Children's, the doctors say, withheld the taxes from their pay.

In 2010, after losing a series of cases in court, the IRS agreed to issue refunds for withholding between 1995 and 2005 - as long as the hospitals provided proof the then students agreed to let the hospitals apply on their behalf.

Colella and Barone, both residents at Children's between 1996 and 1999, say Children's, unlike other Boston hospitals, only filed for refunds for 2000 through 2005 and that Children's never contacted them about the issue, even though both are pretty easy to find - they say they come up first in Google searches on their names and are listed with their respective state's medical registration boards.

And even then, the two charge, the IRS disallowed the hospital's refund requests for 2001 and 2002 for failing to provide all the required paperwork.

They say they did not even learn about the refund issue until after it was too late to file - and that they learned of it by word of mouth from other doctors, not from the hospital.

The doctors are seeking repayment of all the FICA taxes withheld from their pa and not refunded - which they say could be up to $7,000 a year - treble damages and lawyers' fees.

Oops: Harvard mistake means thousands of employees probably paid too much in income tax for several years.


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PDF icon Residents' complaint1.41 MB


How Do I Get My Social

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How Do I Get My Social Security Refund?
If your employer has withheld these taxes in error, follow these steps:

you must first request a refund of these taxes from your employer (if your employer is able to refund these taxes, no further action is necessary) ‐ for Yale‐earned income, contact the International Tax Office
if your employer is unable to refund these taxes, request a statement outlining their denial of your refund and file forms 843 and 8316 Instructions for Filing Form 843 and 8316
If you are unable to receive a refund of these taxes from your employer, you may then file Form 843 and 8316 to request a refund from the IRS.
Why wouldn't they do that? I had a similar thing happen and it got worked out ok with a form.

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Damn lawyers

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Why submit a form when your lawyers can file a class action and take their one-third cut of the settlement?

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