Can I not have taxes deducted from my paycheck if I put exempt on the form where it asks for the dependents?
If you don’t legally qualify to file exempt, you can’t. In order to be considered exempt, you have to certify that you did not have in income tax liability for the prior year and do not expect a tax liability in the current year. In other words, you got a refund of all taxes paid in the prior year (or did not work in the prior year) and expect a refund of all withheld taxes in the current year. Income tax is a “pay as you earn” system. That means taxes are due when the income is earned. This is handled through withholding for W-2 employees and estimated payments for income not subject to withholding. Also remember that Medicare and Social Security (FICA) tax will be withheld regardless of whether or not you have federal income tax withheld.
The only thing that EXEMPT option stops is Federal Withholding. They will still collect 6.2 % for SStax and 1.45% for MedicTax. If you are going to earn more than the total of your standard deduction, $5450 for single, and your personal exemption, $3500 combined, then you can not and should not claim exempt. If you do claim exempt, you will owe a huge tax bill in April 2010 and would most likely also get hit with an Under Payment Penalty. Remember, Taxes and Death are the only two certainties in life.
If you submit a W-4 marked Exempt, you are stating under penalty of perjury that you owed zero income tax last year. At the very least, IRS is likely to nail you with a $500 penalty for doing this. No matter what you do and what your are truly entitled to, it will not affect withholding for social security and medicare taxes.
You are not allowed to file exempt if you aren’t exempt You can enter whatever filing status you would like. For example: single with 99 exemptions in which case not taxes would be pulled. If you file anything more than 9 exemptions you have to complete special paperwork with the irs. However, if you were suppose to pay taxes and none were paid, when you file your 2009 taxes, a penalty will be added.
