Are there tax consequences associated with receipt of ASLRP benefits?
Yes. Payments issued by the Department through the ASLRP are considered income, and are subject to applicable taxes and withholdings. Although a student loan payment is paid directly to the loan holder on behalf of the attorney, the payment is nonetheless includable in the attorney’s gross income and wages for Federal employment tax purposes. Consequently, the Department will withhold and pay employment taxes from the loan payment. The applicable employment taxes include Federal income taxes withheld from wages (and, where appropriate, State and local income taxes), and the attorney’s share of Social Security and Medicare taxes. Tax withholdings will be deducted or applied at the time any loan payment is made. (See 5 CFR 537.106(a).) Please note the implications of deducting taxes directly from a gross loan payment. For example, if the Department has approved a student loan repayment benefit of $6,000 and the attorney’s tax deductions are $2,000, then the Department will make a loan pa
