To use this method, the agency must–
- Calculate the correct amount of employment tax withholding on the
loan repayment using one of two methods–the regular method described in
Question 6 or the flat rate method described in Question 7;
- Deduct the amount of employment tax withholding from the loan repayment; and
- Deposit the amounts withheld and report the employment tax
withholding and wages on Forms 941 and W-2 in accordance with normal
deposit and reporting procedures.
This answer was provided by the Internal Revenue Service (IRS). For further guidance/clarification on this issue, agency representatives may contact IRS (Federal, State and Local Governments) at (202) 283-9665.