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IRS Tax Map 2008
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taxmap/pubs/p929-006.htm#en_us_publink1000203784

Withholding From Wages(p8)


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Employers generally withhold federal income tax, social security tax, and Medicare tax from an employee's wages. If the employee claims exemption from withholding on Form W-4, the employer will not withhold federal income tax. The exemption from withholding does not apply to social security and Medicare taxes.
taxmap/pubs/p929-006.htm#en_us_publink1000203785

Conditions for exemption from withholding.(p8)


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An employee can claim exemption from withholding for 2010 only if he or she meets both of the following conditions.
  1. For 2009, the employee had a right to a refund of all federal income tax withheld because he or she had no tax liability.
  2. For 2010, the employee expects a refund of all federal income tax withheld because he or she expects to have no tax liability.
taxmap/pubs/p929-006.htm#en_us_publink1000203786

Dependents.(p8)


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An employee who is a dependent ordinarily cannot claim exemption from withholding if both of the following are true.
taxmap/pubs/p929-006.htm#en_us_publink1000203787

Exceptions.(p8)
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An employee may be able to claim exemption from withholding even if the employee is a dependent if the employee:
  1. Is age 65 or older,
  2. Is blind, or
  3. Will claim on his or her 2010 tax return:
    1. Adjustments to income,
    2. Tax credits,
    3. Itemized deductions, or
    4. A higher standard deduction for real estate taxes, a net disaster loss, or state or local sales or excise tax on the purchase of a new motor vehicle after February 16, 2009.
For more information, see Exemption From Withholding in chapter 1 of Publication 505, Tax Withholding and Estimated Tax.
taxmap/pubs/p929-006.htm#en_us_publink1000203788

Example.(p9)

Guy is 17 and a student. During the summer he works part time at a grocery store. He expects to earn about $1,000 this year. He also worked at the store last summer and received a refund of all his withheld income tax because he did not have a tax liability. The only other income he expects during the year is $375 interest on a savings account. He expects that his parents will be able to claim him as a dependent on their tax return. He is not blind and will not claim adjustments to income, itemized deductions, a higher standard deduction, or tax credits on his return.
Guy cannot claim exemption from withholding when he fills out Form W-4 because his parents will be able to claim him as a dependent, his total income will be more than $950, the minimum standard deduction amount, and his unearned income will be more than $300.
taxmap/pubs/p929-006.htm#en_us_publink1000203789

Claiming exemption from withholding.(p9)


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To claim exemption from withholding, an employee must enter "Exempt" in the space provided on Form W-4, line 7. The employee must complete the rest of the form, as explained in the form instructions, and give it to his or her employer.
taxmap/pubs/p929-006.htm#en_us_publink1000203790

Renewing an exemption from withholding.(p9)


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An exemption from withholding is good for only one year. An employee must file a new Form W-4 by February 15 each year to continue the exemption.