2007-12-16 08:57:31 · 4 answers · asked by a b 1 in Business & Finance ➔ Taxes ➔ United States
If you are talking about your W-4, putting exempt means the employer won't withhold income tax. If you aren't going to owe any, that's OK. But if you expect to have any tax liability for the year, it's illegal to put exempt on your W-4 form. If you do, you'd owe when you file your return, possibly plus penalties depending on how much you owe.
If you are talking about an organization being tax exempt, it means the organization doesn't have to pay taxes - this can refer to income tax and/or sales tax.
2007-12-16 14:44:18 · answer #1 · answered by Judy 7 · 1⤊ 0⤋
You can claim exemption from withholding if you are not dependent and, if
*Last year you had a right to a refund of all federal income tax withheld because you had no tax liability and
*This year you expect a refund of all federal income tax withheld because you expect to have no tax liability.
Claiming exempt on your W4 does not mean that you are exempt from federal tax or state tax if you have taxable income. It only means that employer will not withhold any income taxes from your paycheck.
You must still file your tax return if you meet the filing requirements. And if any tax is due, must pay it.
2007-12-17 07:01:39 · answer #2 · answered by MukatA 6 · 0⤊ 0⤋
Note: Marking "exempt" on a W4 does not mean exempt from taxes. It means exempt from withholding. If you file your W4 as exempt and make too much money you will end up cutting some checks on 4/15/2008.
2007-12-16 17:20:23 · answer #3 · answered by Wayne Z 7 · 1⤊ 0⤋
Oddly enough, it means exempt from tax.
2007-12-16 17:05:01 · answer #4 · answered by Anonymous · 0⤊ 1⤋