Tread carefully before claiming exempt on your W-4 form.
Your W-4 is filed with your employer. Based on a number of allowances and exemptions you claim, your employer will withhold a certain amount of your income from each paycheck to cover taxes owed to the IRS. If you claim EXEMPT on your W-4, it means that no taxes will be taken out of your paycheck throughout the year to cover what you may owe to the IRS. Claiming exempt does not apply to everyone. Let’s find out why.
Am I eligible to claim exempt on my W-4?
If you want to claim exempt on your W-4, both of the following need to be true:
- For the prior year, you had a right to a refund of all federal income tax withheld because you had no tax liability.
- For the current year, you expect a refund of all federal income tax withheld because you expect to have no tax liability.
If one or both of these are false, then you will not be eligible to claim exempt on your W-4.
Are there any exceptions?
In some cases, claiming exempt is just not an option. Below are some reasons why it may not be for you:
- If your income is $950 or more and at least $300 of that is from un-work-related income (ie: interest or dividend income), then you cannot claim exempt from taxes.
- If you plan to claim dependents on your tax return, then you cannot claim exempt from taxes.
- If you will be itemizing your deductions on your tax return for the year, then you cannot claim exempt from taxes.
- If you are Age 65+ or blind, you must use IRS Worksheet 1-3 or 1-4 to determine if you can claim exempt.
I’m EXEMPT for tax purposes. How do I report that?
After doing some research and realizing that you are, in fact, eligible to claim EXEMPT on your W-4, you’ll need to report that. On your W-4, leave box 5 blank. If you have an amount in Box 5, that takes precedence over Box 7.
Box 7 is where you will simply write the word “EXEMPT”. This will ensure that no withholdings are taken from your paychecks.
What if I claim exempt on my W-4 without being eligible?
You can say hello to a pretty hefty tax bill after filing your tax return along with possible penalties. You are essentially the one responsible for what you report on your W-4. If it is incorrect, the IRS won’t let that slide come time to file your taxes. You’ll be issued a tax due amount with further instructions on how much you owe and payment options.
You could be facing a $500 penalty fee if both of the following are apply to you:
- You make statements or claim withholding allowances on your W-4 that reduce the amount of tax withheld from your paychecks.
- You have no reasonable basis for those statements or allowances at the time that you complete your W-4.
Although penalties from the IRS seem intimidating and sometimes just down-right unfair, they shouldn’t scare you out of claiming something you are eligible for. If you make an honest mistake, you won’t be penalized. It happens. These penalties and strict guidelines are instated in order to keep some sort of order in an organization which is literally trying to cater to the entire nation.
Is there automatic exemption for students?
Although students are loved in the retail and food industries with free fountain sodas at Chipotle and a 15% discount at Kate Spade, the IRS (unfortunately) doesn’t offer the same. Students are advised by the IRS to follow the same guidelines as other taxpayers.
Not to worry, though, students! There is a bright side after all. You may not be automatically exempt from income taxes but you are exempt from FICA (aka social security and Medicare) as long as you are enrolled as at least a half-time student.
When in doubt, ask for help!
It’s easy to fall into the IRS trap filled with tax jargon and W-4 confusion. For many of us, taxes are a thought in our minds only once a year. That’s why we’re here to help you. If you have a tax question and need help preparing your tax return for the year, reach out to our tax experts here at Rapidtax via livechat, email or phone.
Hey ,I am married and have one child and I tried to claim exempt on my W-4 online like my employer told me but it shows up that I can’t because of my marital status (married) .Do I can’t claim exempt if I am married?
You should claim exempt only if you are certain that you will not be tax liable for that specific year or if you did not have any income tax withheld previously. As to why your online W-4 is not allowing you to claim this qualification if you meet both of these requirements, we will not be able to further advise you on this matter.
I been filing exempt for the last 3 montrhs how long is the recommended time to do it before changing it back?
The IRS gives no maximum time that you may be on an exempt status. You must balance the potential tax bill with the zero interest loan you give the IRS if you withhold too much at end the year. Your personal tax deductions and general tax situation should gauge your request for exemption. If you have high deductions you may be able to balance out a longer time being classified as exempt. If you typically pay taxes each year as opposed to getting a refund, filing exempt will likely make this situation worse. Please utilize the IRS withholding calculator to monitor this status.
I’m a full time student who will be making 11$/hr working a part-time job. I am going to get paid bi-weekly. I file my taxes and my parents do not. I do not claim anyone. I was wondering if I qualify as exempt on the W-4?
If you are being claimed as a dependent, your limit would be around $6,000 dollars of earning that is exempt from taxation. If you are not being claimed as a dependent on another person’s return, your exemption limit is around $10,000 dollars. This exemption limit is for the income that you earn overall annually for the specific tax year.
I messed up. I received information from an unreliable source and went exempt for the WHOLE year. From what I Ib read I was not eligible. To top it all off I only filed ONE W2 because I couldn’t find the one where I was exempt the WHOLE year. CAN I FILE that one next year? Or am I screwed? I’m sure I’m gonna have to pay thousands of dollars. God I HOPE there’s payment plans…I’m such a gullible f!$k! Any help would be appreciated.
Any income statements that you receive for the specific year must be filed within that tax year return. You must retrieve all of your income statements either through your previous employer or request an income transcript from the IRS and the State offices. The IRS does provide payment plans, however, it would still be best for you to speak with the IRS about your options and further assistance on this matter.
hey
i am 18 and a citizen of US but i leave in Nigeria and i am presenlty in the US to do a summer job for just 2 months and I go back to Nigeria August. i am earning minimum wage do i write exempt on the w4 form?
Hello Dee,
Since you are a US citizen and you are earning income in the US, they have the ability to tax you on the income you earn. We recommend that you consult with your employer if there are any technicalities that apply to you.
In order to claim exempt, you will need to expect a refund of all federal tax withholding because you did not have tax due.
Claim exempt. You will not be earning above the poverty level in2 months of summer employment.