7shifts Payroll: Claiming "Tax-Exempt" on Your W-4

This article explains "tax-exempt" status on your W-4, which affects how much federal and state income tax is taken from your paycheck. 

What "Tax-Exempt" Means on Your W-4?

• When you fill out a W-4, you tell your employer how much federal income tax to withhold. 
• Claiming "exempt" means no federal income tax is withheld. 
• Some states allow this for state taxes, but not all.

When Can I Claim "Exempt"?

You can only claim you're "tax-exempt" if both of these are true:

• You owed no federal income tax last year. 
• You expect to owe no federal income tax this year.

How to Know How Much to Pay:

• IRS Tool: The IRS has a tool to help you figure out how much tax should be taken out of your paycheck:
  • https://www.irs.gov/individuals/tax-withholding-estimator
• Ask a Professional: If you're not sure, talk to a tax professional.

⚠️  Important Things to Remember:

• Not All Taxes: "Tax-exempt" only means you don't pay federal income tax. You'll still pay Social Security and Medicare taxes.
• State Taxes: Some states don't let you be "tax-exempt." Check your state's rules.
• Be Careful: If you say you're "tax-exempt" and you're wrong, you could owe money later and pay penalties.
• Check Often: If your pay changes, or your situation changes, update your W-4.

You Need to Do This Every Year!

• Exemption is Not Permanent: If you say you're "tax-exempt," you have to do it again every year.
• Deadline: File a new W-4 by February 15th each year to maintain "exempt" status.
• If You Miss It: Your employer will withhold taxes as if you were "single" with no adjustments.