A semiconductor device includes a semiconductor substrate, a gate structure formed over the semiconductor substrate, and an epitaxial structure formed partially within the semiconductor substrate. A vertically extending portion of the epitaxial structure extends vertically above a top surface of the semiconductor substrate in an area adjacent the gate structure. A laterally extending portion of the epitaxial structure extends laterally at an area below the top surface of the semiconductor substrate in a direction toward an area below the gate structure and beyond an area where the epitaxial structure extends vertically. The device further includes an interlayer dielectric layer between a side surface of the vertically extending portion of the epitaxial structure and a side surface of the gate structure. A top surface of the laterally extending portion of the epitaxial structure directly contacts the interlayer dielectric layer.