If a person claims exempt on their W2's could this cause a problem with the IRS. What does exempt actually mean in relation to taxes?
2007-03-13 05:15:47 · 5 answers · asked by stella 2 in Business & Finance ➔ Taxes ➔ United States
If you claim exempt on your W4 you have instructed your employer to NOT withhold Federal Taxes withheld from your pay check. This can result in you having a balance due when you file your return.
If you owe and you can not full pay what you owe by April 17th you will be charged penalties and interest until the balance is paid in full.
2007-03-13 05:28:21 · answer #1 · answered by Anonymous · 2⤊ 0⤋
"Exempt" on a W4 means exempt from withholding and most people do not qualify.
If you claimed exempt you would pay all your taxes at the end of the year. Yes, the IRS will have issues with this.
1) They will hit you will a underwithholding penalty; and,
2) You may be subjected to an additional $500 penalty if you claim exempt but do not qualify.
The istructions to the W4 explain how to qualify for being "Exempt".
2007-03-13 12:23:22 · answer #2 · answered by Wayne Z 7 · 2⤊ 0⤋
Yes, it can cause big trouble. Exempt just means that nothing will be deducted from your paycheck toward income taxes, it doesn't mean that you're exempt from paying them. The instructions are very clear that you can't file exempt if you expect to have any tax liability.
Look at the line where you sign. It says that you are declaring under penalty of perjury that the info on the form is correct.
If you file exempt and aren't, and you have tax liability for the year, then at a minimum you'll have to pay it all at the end when you file, and will probably be liable for penalties for underwithholding.
2007-03-13 15:35:58 · answer #3 · answered by Judy 7 · 0⤊ 0⤋
You don't claim EXEMPT you a W-2. A W-2 is the Wage and Tax statement you get from your employer each year.
You can claim EXEMPT on your W-4 for withholding purposes IF you had zero tax liability the privious year AND expect to have zero tax liability for the current year.
Claiming EXEMPT on your W-4 only means that your employer will not withhold income taxes from your pay. If you actaully have a tax liability after claiming EXEMPT, you'll have to pay the taxes and probably will be assessed penalties and interest for underpayment of your taxes.
If you improperty claim EXEMPT you can get into trouble with the IRS. Your employer is required to notify the IRS if someone appears to be claiming EXEMPT status when they are not likely to qualify for that status.
2007-03-13 12:21:50 · answer #4 · answered by Bostonian In MO 7 · 4⤊ 0⤋
It depends on how much money you make. In order to be exempt you have to make under a certain amount of money. If you make more you will owe taxes at the end of the year! Good luck!
2007-03-13 12:22:41 · answer #5 · answered by Rhonda B 6 · 1⤊ 2⤋