You make the call

Question: An unmarried individual, Samantha, filed her income tax return for 2024 on April 11. Samantha’s adjusted gross income (AGI) was $5,000 and had no federal income tax liability. She had $180 of income tax withheld during 2024. Samantha estimates that she will have approximately the same amount of AGI for 2025 and no income tax liability. On April 25, Samantha started a new job and believes she was exempt from federal tax withholding. Is she correct?

Answer: Yes, she is correct.

An individual may claim an exemption from federal income tax withholding in the current calendar year under the following conditions:

1. Had no federal income tax liability in the preceding calendar year, and
2. Anticipate having no federal income tax liability in the current calendar year [§3402(n)]

As long as Samantha meets these two conditions, she is exempt from the withholding and will have no income tax withheld from her paycheck.

To claim exemption from withholding, she should write “Exempt” on Form W-4, Employee’s Withholding Certificate, in the space below Step 4(c). Then, complete Steps 1(a), 1(b), and 5. Do not complete any other steps.