Should I be exempt from taxes?

Question

I noticed that one of my co-workers paycheck is almost $100 more than my paycheck and we have been working the same exact hours. She than told me that she is "exempt". I have no idea what that means, I just know she's getting more money than me! I just want to know if I'm allowed to put that as well. I am 17 and live in New Jersey, if that affects anything. Can somebody help me please =)

I just wanna add that my co-worker is also the same age as me, not married and no kids =)
and i just started working recently (July 9th) and get paid $11.17 an hour, full-time 80 hours a week. let me know if you need to know anything else.
i just dont understand when a person should be extempt.
thanks =)

Answer 1

your co-worker is not exempt from taxes, although she may have worked out her likely income tax liability and found that it is zero.

if so, she can file for multiple exemptions so that her income tax withholding is zero and thus her paystub will be larger than yours.

the most likely cause of this is that she has several small children at home and no husband. This gives her lots of dependents plus the earned income credit.

however, most likely, she also has trouble paying her bills because the kids need food, clothes, and medical care.


so you probably don't want to swap places with her.

***
you too can get the tax forms [use the 2006 forms] and figure out your likely income tax liability. then you can figure out how much more you 'should' have withheld this year.

if the answer is 'a lot less', then file a new W-4 form with your employer and your check will be adjusted. [W-4 is available from your manager or the personnel office].


GL

Answer 2

If you are a dependent of your parents, and if you are 17 you probably are, then you can make up to $5350 in 2007 and not have to pay taxes. If you don't expect to make more than that, then you can file a W-4 as "exempt" and they won't take taxes out of your paycheck. If too much has already been taken out, you can file a return in early 2008 and get any excess refunded to you. But if you claim "exempt" and arent, you end up having to pay the tax at the end of the year, plus possible penalties and a possible fine for claiming exempt if you aren't. Exempt doesn't mean you don't owe taxes, it just means that nothing is deducted from your paycheck.

$100 sounds like a lot, though, to have taken out - is it possible that her hourly rate is more than yours? Being exempt shouldn't make that much difference unless you have a really high paycheck, a lot more than a 17 year old would typically make. Please post again, with the numbers from your last pay stub - your gross pay, and any deductions, along with how often you get paid. Then you can get a lot more detailed answer.

Answer 3

I have no idea how she could be exempt from paying taxes. She may have claimed more dependence that you did on your taxes and that means more taxes come out of your check than hers. The catch is at the end of the year she will owe the government money while you may end up getting some back. There are people who add tax exemptions to their tax forms. Then they take their money and figure up about how much tax would come out and put it in a savings account and draw interest on it. Then at the end of the year they just see what they owe and then they pay that pulse a percentage of what they made on the interest(because that is taxable as well). I think the safest way is doing what you are doing. The government will take some out but at the end of the year you will get some of it back. She will more than likely end up having to pay all of her taxes and that could be quiet a bit. So I hope she is saving a good part of it.

Answer 4

When a person claims "exempt" on their payroll form, no taxes are taken out. They will take home more money. It does not mean they will owe less taxes.

A single person making $22,000 a year will owe income taxes even if she only works for six months and makes $11,000. She is not exempt from paying taxes.

You can go to your payroll department and ask them about your W-4. But I would guess that you have done yours correctly, and your coworker is going to face a tax bill when she files.

Answer 5

Talk with your payroll people. Its all about what you claim as an 'exemption' or dependent and how much is taken out of your paycheck which affects next April 15 when you get your w2 form in the mail and submit your tax form. Or read on the irs.gov site

Answer 6

Double check your W-4 form. It will give you all the criterion for declaring yourself exempt from Federal income taxes.

Check out the website below, it has a pretty detailed take on "how to fill out your W-4"