If you’re exempt from federal withholding, then your employer will not withhold federal income tax from your paychecks. They’ll still withhold Social Security, Medicare, and state and local income taxes.
If you’ve determined that you’re exempt from federal income
tax withholding, you can’t just tell your boss. Instead, you’ll need to fill
out a new W-4 form and submit it to your employer. On your W-4, leave lines 5
and 6 blank and write “exempt” on line 7.
Your W-4 is used to determine how much income tax your
employer should withhold, and the form usually doesn’t expire. But, if you’re
claiming the exemption, you will need to submit a new form to your
employer every year by February 15. If you submit the form after February
15, your employer won’t be able to accept the exemption and will have to start
withholding federal income tax from your paychecks.
What happens if my employer already withheld federal income tax?
Your employer has to withhold income tax from your checks
until they receive your W-4 claiming exemption. If you’ve been paid this year
and had income tax withheld, you’ll receive a W-2 at the end of the year that
includes how much was withheld, and you can claim a refund when you file your
annual tax return.