what happens if I claim exempt on my fed and ca state taxes?

Question

there was money being taken for state and federal tax because I had been claiming "3", but at the same time I was also exempt from 3/2007-7/2007. Do you think I'll have to pay at the end of the year?

Answer 1

What happens if you claim exempt - No withholdings will be taken out of your paycheck. Do I think you'll have to pay at the end of the year - Don't know how much income you will have for 2007 vs what deductions and exemptions you'll have. If your deductions and exemptions are more than your income, then you won't have to pay at the end of the year. If your deductions and exemptions are less, then you might unless you have credits (earned income credit, child tax credit) that offset the tax.

If you are on your own, and nobody else can claim you, if you are single and under 65 you can earn up to $8,750 without having to pay any tax. Standard Deduction for a single person <65 is $5,350 for 2007, and Personal Exemption is $3,400. I can't tell you for certain one way or another, because I don't what your income will be for 2007, and don't know if you are single, married, head of household, dependent on someone else's return, etc. Need more info to be more accurate.

Answer 2

How do you figure your were "exempt" from 3/2007 - 7/2007? You can't be "exempt" for part of the year -- it's all or nothing.

The only way that you can claim EXEMPT from withholding is if you had $0 tax liability last year and expect to have $0 tax liability this year. $0 tax liability means that that's the number on the total tax line of last year's return, not just that you didn't have to pay or got a refund.

If you file a fraudulent Form W-4 you can be hit with a $500 penalty by the IRS and claiming exempt when you're not entitled to it is fraudulent.

If you're claiming 3 and are a Single taxpayer it's very likely that not enough is going to be withheld to cover your tax liability unless you have significant itemized deductions or other adjustments to your income. If that's the case, you probably need to change your withholding allowances to 0 for the rest of the year to avoid a tax bill at the end of the year.