I claim Exempt but I still pay lots of taxes each paycheck

August 1, 2016 11:18 AM

Hi all, I claim exempt at two of my part-time jobs. However, I still get federal and state taxes withheld each paycheck (about 20% of each paycheck). Is my job doing this correctly? And should I be claiming exempt? I'm a graduate student and making about 13k a year. Thanks!
posted by Kombucha3452 to Work & Money (14 answers total)

Exempt means exempt from overtime pay and other labor protections. It doesn't mean tax-exempt. If exempt employees didn't have to pay taxes, we'd be in real trouble.
posted by amtho at 11:22 AM on August 1, 2016 [9 favorites]

Exempt classes of jobs are generally management or specialized, and there is usually an income minimum well above your $13,000. I'm not sure what benefit you get from calling yourself 'exempt', because that generally means your employers don't need to pay you for overtime, which as a part-time person making $13,000 you definitely want.
posted by AzraelBrown at 11:25 AM on August 1, 2016 [1 favorite]

Claiming an exemption from tax withholding only affects federal income tax, not state taxes, social security, or medicare. So, that's probably still being taken out of your check.

You're not automatically exempt from federal tax just because you're a student, so I'd recommend checking with the IRS withholding calculator to see if it still makes sense for you.
posted by cabingirl at 11:27 AM on August 1, 2016 [2 favorites]

The OP is talking about exempt status on their W-4.
posted by ftm at 11:27 AM on August 1, 2016 [10 favorites]

Do you mean you claimed "Exempt" on your W-4? If that's the case then, no, your employers should not be withholding federal income taxes. Try filing another W-4 (you can do that at any time) and see if that fixes things.
posted by Betelgeuse at 11:28 AM on August 1, 2016 [1 favorite]

amtho, I'm pretty sure OP is talking about a different exempt (box 7).
posted by phunniemee at 11:28 AM on August 1, 2016 [3 favorites]

When I worked for a company that had employees all over the world, a bunch of them claimed exemption for various reasons (some of them apparently legit, others... less so). Payroll's response was that they withhold for everyone because they didn't want to have to explain to the IRS why they were doing it for some dodgy-ass reason, and you'll get it back in April. (On the other hand, no Americans who worked for us would be anywhere near satisfying Box 7 on the W4, which is a much more common thing, and your payroll department should be able to deal with it.)

But it sounds like you will satisfy those requirements, and you should probably push back on this. However, ask yourself first: How hard do you want to push? Sure, it's essentially an interest-free loan to the U.S. government, but it's not a lot of interest, and it may not be worth your time and effort.
posted by Etrigan at 11:40 AM on August 1, 2016 [2 favorites]

FICA (medicare & social security) will be about 7.65% of your income, and filing exempt doesn't get rid of them. You don't say your state but the W-4 is only for Federal so there may be additional state withholding for various things - another 12% or so from the state seems pretty reasonable. Are there details on your paystubs about exactly what the withholding you're doing is?
posted by brainmouse at 12:19 PM on August 1, 2016 [1 favorite]

Yes, if you're not comfortable posting amounts, post the descriptions/codes on your pay advice for your pre- and post-tax deductions.
posted by praemunire at 12:29 PM on August 1, 2016

The line between having to file taxes or not was around $6000 last year - so you'll be filing taxes for this year if you are making $13K. I don't know off the top of my head about the standard deduction, but it seems possible to me you'll owe some Federal tax, which could be a painful surprise of you haven't paid in all year.
posted by COD at 2:43 PM on August 1, 2016

Best answer: If you want to have them withhold less federal income tax, you can claim more dependents on your W-4 than you actually have. IANYTA, so I am not sure if this will cause you any problems. I think as long as you file your return with the correct number of dependents and don't wind up owing more than $1000 in additional tax, you "should" be OK.
posted by H21 at 3:45 PM on August 1, 2016 [1 favorite]

Exempt means exempt from overtime pay and other labor protections. It doesn't mean tax-exempt.

A W-4 isn't soliciting your FLSA classification.

As other commenters note, this is FICA and state tax.
posted by jpe at 4:37 PM on August 1, 2016

If you're being paid by your university, it'll fall under the student FICA exemption, so you shouldn't be seeing FICA withheld by the university. The exemption doesn't apply to things like summer teaching.

(This also means that money doesn't count as Social Security earnings. I got my first Social Security statement and was trying to figure out why they thought I had worked one year and earned $0. That'd be why.)
posted by hoyland at 5:14 AM on August 2, 2016 [1 favorite]

If you're already filing as exempt, it's unlikely the trick you marked as best answer will help: again, that won't affect FICA, and it won't affect your state taxes (though depending on your state there may be something you can do to lower that burden)
posted by brainmouse at 7:37 AM on August 2, 2016