My employer (IL) paid for my tuition by issuing a loan (promissory note). Now it has forgiven loan principal and interest. Since it's forgiven, employer wants to add it to my W2 for my tax purposes. I understand that that amount should be taxed. However:
1. Do I have to pay taxes on forgiven interest amount too (FICA,State,Federal)?
2. Is there any sort of deductions I can take out of it (my AGI for the past few years were more than 80k)?
3. My employer says that taxes would be around 8k on that loan. I asked the employer to withdraw only FICA taxes and that I'll pay Federal and State (IL) when I file my taxes on March 2021. Are there any re-precautions to that? I heard that I might incur penalties for not paying W2 taxes on time when they go through my paycheck.
