Q about tax withholding and EIC?

Question

My son works for temporary service and earns about 300 a week. He claims EXEMPT from withholding yet they withhold taxes and add EIC payments in the same amount. Anyone know why this may be?
They will not discuss it with me and just tell my son that's what they have to do.

He is an adult with no dependents. They are withholding ss, med. care, fed, and state. I thought exempt meant no fed or state withholding. And the EIC is added to his pay. He says he did not do w-5.

Everything stated is correct. They withhold all taxes (fica, fed. state)and add EIC which totals the FED and State amounts withheld.
Don't look right to me.
W-4 = exempt
no w-5

Answer 1

Is your son an adult or your dependent? If he's an adult, does he have his own dependent?

I ask because a dependent isn't supposed to file "exempt" on a W-4 at work because it's too easy to owe money. (Which taxes are they withholding? SS/MC is always withheld.)

I ask about his dependents because you aren't supposed to get "Advance EIC" unless you have a qualifying child and can claim EIC at tax time. Advance EIC is added back as a tax on the 1040A/1040. (If you get $1500 in advance and $2000 when you file, this results in $500 left as a refund at tax time. If you get $1500 in advance and get $0 EIC when you file, you have to pay the $1500 BACK.)

Answer 2

Something is more than a little messed up here.

Exempt or not, they still take out 7.65% for social security and medicare. His pay stub should show what's being paid and what's being deducted, and what each entry is for. Depending on the state, they might also take out state and/or local income tax.

At $300 a week, he'd make over $15,000 a year, so as a single person with no dependents he'd have some tax liablity and could not legally claim "exempt". His federal income tax for the year will total around $700 if he makes $300 a week all year. Depending on where he lives, he might also owe state and/or local income tax.

His income if he earns $300 a week is far over the limit for being eligible for an Earned Income Credit (EIC) since he doesn't have a qualifying child. For people who are eligible, it's possible to get some of the EIC during the year, but only by filling out the proper paperwork and you said he said he didn't. So something is VERY strange with this supposed EIC payment.

He needs to talk to whoever does payroll and find out what's really going on. Maybe you could go along with him if he sees them in person, or be on an extension if he calls on the phone. They can't legally talk to you without his permission. Take a look at his pay stub to be sure that the things in your question are what's actually there. If it's as you describe, what they're doing in going to get him in trouble, especially re EIC.

Answer 3

Even if he qualifies to claim EXEMPT, they must still withhold Social Security, Medicare and State taxes. If he's eligible for the EIC he must have filed a Form W-5 with his employer to receive advance payment of the EIC.

Without knowing a lot more information about his personal tax situation it's not possible to say if he's entitled to either claim EXEMPT or receive the EIC.

They cannot pay EIC without a W-5 from him. If they are, someone in Payroll has screwed up ROYALLY. And if they're withholding income taxes he did NOT claim EXEMPT.