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What happens if I go tax exempt for the year? Will I owe money if I make less than $40,000?


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What happens if I go tax exempt for the year? Will I owe money if I make less than $40,000?
@cookteam20 let's say you make $40,000 and you are single with no children.
the standard deduction is $12,950 and the 2022 tax on the remaining $27,000 is around $3000
so you would owe tax - claiming exempt is not a good idea.
if you have children, are married, etc. that changes the equation.
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What happens if I go tax exempt for the year? Will I owe money if I make less than $40,000?
And it depends on what kind of income you have. Like self employment or dividends and sales.
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What happens if I go tax exempt for the year? Will I owe money if I make less than $40,000?
and with no withholding, you could be subject to penalties for underpayment of estimated taxes
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What happens if I go tax exempt for the year? Will I owe money if I make less than $40,000?
The penalties for not having had any tax withheld during the year are one reason that it's not a good idea to claim exempt if you are going to owe tax.
Another reason that it's not a good idea is that it's not legal. The IRS instructions for Form W-4 say:
"You may claim exemption from withholding for 2022 if you meet both of the following conditions: you had no federal income tax liability in 2021 and you expect to have no federal income tax liability in 2022."
So if you do expect to have to pay any tax at all for 2022, you are not allowed to claim exempt.
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