26.3 Low Earners May Be Exempt From Withholding

If you had no income tax liability in 2012 and expect none for 2013, you may be exempt from income tax withholdings on your 2013 wages. If eligible, students working for the summer, retired persons, and other part-time workers do not have to wait for a refund of withheld taxes they do not owe. The exemption applies only to income tax withholding, not to withholdings for Social Security and Medicare (26.9). However, if you can be claimed as a dependent on another person’s tax return, the exemption from withholding is not allowed if your expected total income (wages and investments) and investment income exceeds annual limits. For 2012, the total income limit was $950 and the investment income limit was $300. These amounts may be increased by an inflation adjustment for 2013, and if so, the revised amounts will be on the Form W-4 for 2013.

If you cannot be claimed as a dependent by another person, you can claim the exemption from withholding if your total income is expected to be no more than the sum of your personal exemption and the standard deduction for your filing status.

To claim an exemption for 2013, you must file a withholding exemption certificate, Form W-4, with your employer. If you will file a joint return for 2013, do not claim an exemption on Form W-4 if the joint return will show a tax liability. An exemption claimed during 2012 will expire February 18, 2013.