Back when I worked summers and part-time college jobs I remember an option of declaring that I would owe no tax (At least federal) and it was not withheld from my paycheck. In other words it was the taxpayers responsibility to get your tax liability correct at the end of the year, and it could well be zero.
My daughter is starting a 10-20 hour/week job and I’m wondering if such options are still possible?
Yes. See this link.
If you click Yes, then you get this:
I would point out that the W-4 doesn’t change the responsibility for getting tax right. It is always the taxpayer’s responsibility. Withholding through the employer is just a way to help people pay the tax throughout the year, using a system of assumptions that guesstimates how much to withhold. Since those are just assumptions and guesstimates, nobody should ever get to the end of the year and say “It’s my employer’s fault I owe taxes.” (Even if the employer did the W-4 withholding wrong, it’s still your fault for not double-checking your pay stubs.)
As a general rule, I’d only recommend the exempt option for people who make less than $5,000 a year. It sounds like your daughter will meet the requirement if she’s just now starting work this year.
If she does choose that option, she’ll want to be sure that she carefully reviews her situation at the beginning of every year. She’ll need to update the W-4 to get withholding started. Lots of people forget that and launch into full-time work with no withholding.
It doesnt save anything. In fact, it could be a tax headache.
If you dont file exempt, you just a get a refund.
For the people that can claim exempt it saves having to file a return and for waiting for a refund. It’s money in the pocket now which is better. I did it when I was a student with part time jobs.
Sure, but 20 hours a week @ say $10/hr means $10,000 a year or so. And what if she gets a better job later in the year?
W-4 forms are filed with your employer, NOT the IRS. If/when somebody gets a bigger or better job with a new employer, they fill out a new W-4 which pertains to their new and changed situation.
About the only way somebody screws up is to start a part-time low-pay job early in the year with a W-4 saying “exempt”. Then change mid-year to a high paying job with the *same employer *and they forget to update the W-4 and get surprised at year end.
Avoid that rookie mistake and all will be well.
The main way it turns out to be the employer’s fault is when the employer properly withholds the money from the employee’s paychecks but than pockets it instead of sending it to the IRS. Which happens a lot to folks working for struggling small businesses.
Sadly, the IRS’ perspective is that the employee just needs to pay the IRS again when the non-payment comes to light and the IRS will take its time trying to squeeze some blood out of the deadbeat probably penniless employer.
Also sadly, (AFAIK) there’s not a way for a suspicious employee to check with the IRS during the year to ensure the tax deposits are actually being made on their behalf.
Yes, that’s true. but if you earn say $4000 in 8 months, then $20000 in the next 4, you havent paid any taxes on that first $4000, and will owe, come tax-time. Or four employers each with $4000, etc.
So, it’s quite possible to screw up with multiple employers.
I don’t know all of the possible scenarios for an employer not paying… but I do know that the employees often get credit for the unpaid tax. An ex-client of mine was more than 2 years behind on payroll tax payments when I ended working with them, but I know that their employees still got refunds based on the tax withholding shown on their W-2.
This is not true. If the Employer practices Employment tax fraud, the employee is not on the hook, all taxes withheld are credited to the Employees account, even if the Employer doesnt pay the IRS.
**You should not be posting incorrect info like this. **
Dear Tax Talk,
*In 2002, Bankrate’s tax adviser wrote the following: “Whether or not your employer paid over taxes withheld from your paycheck to the IRS does not affect your right to claim them on your tax return. If your former employer does not give you a Form W-2, then you’ll need to reconstruct your wages and withholding to file your tax return.”
Is this law still valid? If my employer withheld, can I claim a credit whether or not my employer actually turned in the taxes?
– Brett
Dear Brett,
Yes, you can claim a credit for payroll taxes withheld from your paychecks, whether or not your employer actually paid the taxes to the IRS.
*
Yep. Your only issues are if they treated you as a Independent Contractor and took nothing out, or if you have no records.
He is totally incorrect.
Thanks for the correction.
I wonder if that’s been that way for a long time or is a recent change. I’m pretty sure that I’ve read of the scenario I described, but it would have been 10 or 15 years ago when I was last in the business of employing lots of low-end workers who’re likely to have been screwed over by one employer or another. Or it may be as you suggested that I was remembering a case where the employee didn’t have effective records either.
At any rate, ignorance fought. Thanks.
I’d hoped to say something special for my 10,000th post. Instead it turns out to be an apology for being flat wrong about something. Oh well, sorta the story of my life I guess.
Tax law is complicated. No, I take that back- it’s *damn *complicated.
Thank you for the apology.
Actually, I think it was something special. As they say, it takes a big man to admit he’s wrong.