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Frequently Asked Questions Pay & Leave

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What methods may an agency use to withhold income taxes and the employee's share of social security and Medicare taxes (employment taxes) when the agency repays a student loan incurred by an employee?

An agency may use any of the following methods. Different methods may be used for different groups of employees. The agency may–

  • Withhold employment taxes from regular wages paid to the employee;
     
  • Withhold employment taxes from the loan repayment; or
     
  • Require a separate tax payment from the employee.

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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