Tax Exempt

[Oxtrainer]

Dependent 16 has W4 says tax exempt. Nothing taken out.
Dont work for parents, school, newspaper, not hopital empl, not statutory.
Not tips. It is a part time summer job.
Any idea what it could be?

[joanmcq]

line 7: if last year you had no tax liability and this year you will have no tax liability, you are exempt from federal withholding. Way back when, (way, way back when) I was a high school student, most students claimed exempt, rather than having to file just to claim a refund.

[taxmandan]

W-4 exempt

They are exempt from withholding for federal income tax, it does NOT mean their income is tax exempt! They may still have taxable income if they end up earning enough to exceed the SD and personal exemption thresholds. And likely could owe state taxes so returns may still need to be filed.

[BJM]

Exempt

Back in the day when some form W-4's were required to be sent to the IRS, exempt from federal withholding was one, many students claimed this thinking just because they were students they were exempt, not because of tax liability requirements, which they did not meet, and many of these students were surprised when they received a notice from the IRS that they owe a $500 penalty for filing a false W-4.