Income Tax Stuff

Factual Questions
1

I’ve had lots of jobs over the past few years, but I never really thought about this.

Ever since my first time filing taxes, I’ve been entitled to a full refund every year because I’m a full-time student who only works during the summer, and therefore I make a very small amount of money. I’m single, live at home, and work about 20 hours a week. This is enough alone to take care of my bills and provide some ample spending money.

A couple questions-

  1. Since every year I have been entitled to a full refund, can I claim exemption this year? I plan to make under about $4,000 this summer.

  2. So far, I’ve had Federal and State taxes taken out of one paycheck. If I change my tax status to exempt, will I just get a W2 in January for that amount of tax, then get a refund of that amount?

  3. What is FICA, and why is it taken out of my paycheck?

  4. Where does Medicare go? I don’t use Medicare, so is it just some kind of universal donorship thing, that I will pay and then use in the future if I need to go on Medicare?

Thanks y’all.

2

  1. Yes. Fill out your W-4 accordingly.

  2. Yes. You will need to file a return to receive your refund.

  3. Federal Insurance Contributions Act = Social Security tax.

  4. Medicare taxes go to pay for Medicare; I don’t think it’s an earned-benefit plan like Social Security.

3

Awesome… so basically, from here on out, all I really need taken out are FICA and Medicare? That is, I can pretty much claim exemption from federal and state withholding, and because I make close to nothing, I won’t have to pay later?

4

Correct, as long as your prediction about earnings during the year is accurate.

If you have no tax withheld, but then wind up earning enough to owe taxes, there could be penalties for underpayment/under-withholding. There’s a lot of “it depends” involved here.

5

Gotcha-- thanks!