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Frequently Asked Questions Pay & Leave

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What are the Federal employment tax obligations of an agency that repays a student loan incurred by an agency employee?

The agency must–

  1. Pay the employer's share of social security and Medicare taxes on the loan repayment;
     
  2. Withhold and pay Federal income tax withholding (and appropriate State and local income tax withholding) on the loan repayment;
     
  3. Withhold and pay the employee's share of social security and Medicare taxes on the loan repayment; and
     
  4. Report the loan repayment and taxes withheld and paid as required under Federal law and applicable State and local laws.

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.

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