Do Federal Employees Pay Less Taxes? – Clearing Up the Confusion

There’s a widespread misconception that federal government workers don’t pay the same taxes as everyone else. Let’s clear that up—federal employees are subject to the same tax regulations as all other American workers. Even though their retirement benefits may be structured a bit differently, they still pay federal income tax, Social Security, and Medicare taxes just like private-sector employees.

Their taxes are withheld and reported by the Defense Finance and Accounting Service (DFAS), the government agency in charge of payroll and tax reporting for various federal departments. Like private-sector workers, they receive a Form W-2 annually to reflect their income and withholdings.