Have a client that filled out W4 claimed Exempt, Single person, lives at church, a certified nun, has a regular job outside of church, donates all funds receive from regular job to 501(c)3. Do she still have to pay taxes on money earned from the employer that she donates all to a non-profit organization? I told her if you have a regular job you will have to pay taxes on the money earned. But since she claims exempt $0.00 for federal and state was blank on W2 because she claimed exempt.
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All of her income is subject to taxes. Her taxable wages would be in box 1 of the W-2.
"Exempt" on the W-4 only says that she thinks that she will not owe tax after her deductions, exemptions, etc. so no taxes were withheld in advance.
Contributing her pay to a 501(c)(3) organization would be a charitable contribution that could reduce her taxes if she Itemizes her deduction on Schedule A.
The bottom line is that the W-4 has no meaning for preparation of the tax return. If her "taxable income" on Line 43 of her 1040 is above zero, she probably will need to pay tax. -
And she needs to understand that if she meets the filing requirements for total income, then she needs to file a return. She may not be able to deduct all of her charitable contributions. There is usually a 50% limitation based on AGI. Maybe she has enough between itemizing and her exemption so that she doesn't owe anything. But she may still need to file. For a single person in 2015, the minimum is $10,300. If over 65, add another $1,550, for $11,850. What she did on her W-4 is immaterial. BTW, the IRS requires her to file a new W-4 every year to avoid withholding.Last edited by Burke; 12-10-2015, 05:01 PM.Comment
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