I recently turned 18, therefore naturally I am starting my first job. I am filling out the new hire paperwork, and there is a question about exemption from withholding. I’m confident I qualify because I’ve never worked and hence have never paid federal income tax; my question is if I should register for an exemption. I will gain more money, but will this return to bite me in the future?
Claiming exemption from withholding can boost your paycheck, but consider potential tax owed later. Ensure you’re aware of tax implications; using IRS tools or advice can help decide wisely.
It’s very apparent what you need to do in order to claim exemption on the W9: you had no tax liability the year before and you anticipate not having any this year. Have you filed your taxes for the past year? Look at it to see how much tax you owing, if that’s the case. You are unable to make an exemption claim if the sum exceeds $0.
How much you make in 2022 will determine whether you are liable for anything this year. Calculate your expected income for 2022, search for a “2022 tax estimator” online, and determine how much you should anticipate owing. You cannot claim exemption if you do.
Your tax responsibility remains unchanged as a result of your tax withholding, but you are still required to pay any taxes you anticipate owing.
Claiming an exemption from withholding is appropriate if you had no tax liability last year and expect none this year. Consult a tax professional to ensure it suits your situation.