Can someone change their status on their W-4 to "Exempt" for the last couple paychecks of the year?

Question

Why would someone do this? What are the pros and cons of doing this?

Answer 1

You can increase your dependicies your claiming to like 4 or 5 (whatever the max is i dont know). I know people i work with whom do that twice a year. I think you need a special circumstance for exempt though.

We get paid bi-monthly, and there are two times during the year that we get a third paycheck during the month. So when that time comes around a lot of people increase their dependants so they are taxed a lot less.

The PRO of this is that you are getting more money and less tax for these 'extra' paychecks.

The CON is that when you file taxes you are going to get a smaller refund.

I don't believe it is really illegal to do this, its only illegal as far as I know claiming more dependants on your tax return than you actually have. Then you are trying to steal money from the IRS.

But if you switch back during tax season, your not getting away with anything because you will be getting less of a refund or more of a bill.

Answer 2

Not legally, unless they meet the requirements for exempt: no tax liability last year or expected this year. But there's nothing really to stop someone from doing it, unless they're concerned about lying under oath by signing a false W-4.

They could accomplish the same thing by filing a new W-4 with a high number of allowances.

Answer 3

You cannot claim exempt status unless you qualify for it. It means that federal taxes are not withheld from your paycheck. Check the IRS's website to find out what the requirements are.
But you cannot arbitrarily claim exempt status to have bigger paychecks toward the end of the year.

Answer 4

I wouldn't change it to EXEMPT, but if you have been claiming "0" all year, you could switch it to "1" or "2". This way, they will take less taxes out of your paycheck for the last few of the year.

If you claim too many all year, however, beware! You may end up paying taxes come April.

Answer 5

Your exemp/non-exempt status has to do with your job responsibilities. Generally speaking, professionals and managers are exempt. If your duties were changed by your employer to professional/manager tasks, you can expect that your employer will change that.

I don't think there is a way, you can do that unilaterally.

Exempt employees don't get paid for overtime. Theoretically, that's because their compensation takes into account that there will be uncompensated overtime.

Answer 6

Legally, you can't claim 'exempt' on a W-4 unless you expect your tax liability for the entire year to be 'zero'. You can claim 10 withholding allowances. This will reduce your withholding to zero unless your income is way to large to be asking Yahoo Answers for tax advice. This would reduce your withholding for December, but has no effect on your actual tax liability. Unless you have already had you full tax liability withheld, it would cause you to own the IRS.

Answer 7

You can fill out a new W-4, but you won't gain anything by doing this for two paychecks. It should have been done for the last quarter of the year, and even then, it won't gain much for you.