Exempt status part-time

Q. Is it illegal to claim exempt status on my W-4 for a couple of paychecks?

A. To get the answer to your question, we need to examine the statements on the W-4 relating to the exempt status.  Exempt means you will have no federal withholding on your paycheck.  It does not affect Social Security and Medicare withholding.  To be exempt, the form requires that you verify the following two conditions:

• Last year I had a right to a refund of all federal income tax withheld bec ause I had no tax liability and
• This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.

If you are not able to say yes to both statements, look carefully at the statements at the bottom of the form, “Under penalties of perjury, I declare that I have examined this certificate and to the best of my knowledge and belief, it is true, correct, and complete.”  If you are willing to accept the risk detailed in the “jurat” statement at the bottom of the form, then it is fine to do this.  But let’s think about this carefully.  Are you only going to meet the qualifications for exempt for two weeks?  If you have knowledge that you will not be eligible for it for the rest of the year, then you should not do it.

If you meet with your tax advisor or CPA, they will be able to help you claim the correct amount of allowances for your situation to keep a constant withholding number for the entire year.  If you are a commission-only employee and your commissions vary widely, then it is still best to complete your W-4 claiming the number of allowances to which you are actually entitled.  Using Publication 919 later in the year, you can get a good idea if your withholding will be too much or not which will give you an idea if you should adjust your W-4 for the remainder of the year.

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