This week’s question comes from Jennifer, an office manager: A new employee gave me a Form W-4 claiming exemption from federal income tax withholding. Can I give him a paycheck without withholding federal income tax? Answer: An employee who gives you a valid Form W-4 claiming exemption from federal income tax withholding does not have to have federal income tax withheld from his check. An employee may claim exemption from federal withholding if the employee had no federal income tax liability last year and does not expect to have a liability this year. Being of a certain age, being a student, or getting a refund on a federal income tax return (Form 1040) does not necessarily entitle an employee to claim exempt status. Valid Forms W-4 generally expire on the first weekday after February 14 of the succeeding year. For example, 2008 Forms W-4 claiming exempt status will expire February 16, 2009. At that point, employers must either obtain an updated Form W-4 for the new year or withhold based on the last valid Form W-4 they have for that employee. If none be available, employers must withhold based on single and zero withholding allowances.
Employees who submit invalid Forms W-4 are not to be allowed exempt status. Invalid forms include forms developed by the employee, forms with the certification language deleted, forms with the word “exempt” on line 7 and a number on line 5 or an amount on line 6, and forms that the employee indicates in any way are false.
Exemption from federal withholding does not automatically entitle the employee to an exemption from Social Security, Medicare, or state withholding tax. There are limited exceptions to withholding of Social Security or Medicare tax that are unrelated to an employee’s exempt status. Also, state exempt status generally follows different rules and requirements and filing of a state withholding form claiming exempt status. Contact Vision Payroll if you have questions on an employee’s Form W-4.