Federal W-4 Exemption
Claim exemption from federal withholding by meeting IRS criteria and submitting a W-4 form.
Exemption from federal withholding
Goals and takeaways
- Understand what it means to claim exemption from federal income tax withholding
- Learn the criteria for claiming exempt status
- See how exemption affects payroll processing and year-end tax reporting
What does exempt from withholding mean?
When an employee submits a Form W-4 and claims exemption from federal income tax withholding, it means:
- They expect to have no federal income tax liability for the year
- They meet IRS criteria to be exempt from federal income tax withholding
Even when an employee claims exempt, the wages paid to them remain subject wages and will still be reported on a Form W-2. This status does not affect Social Security, Medicare, or applicable state/local tax withholding.
Employees who incorrectly claim exempt may owe federal income taxes—and possibly penalties—when filing their annual return.
Requirements to claim exempt status
To be eligible for exemption from federal income tax withholding, the employee must:
- Have owed no federal income tax in the previous year, and
- Expect to owe no federal income tax in the current year
An employee may meet the second requirement if their income is below the standard deduction amount for their filing status.
Key things to know
- Exempt status is only valid for the calendar year in which the Form W-4 is submitted
- A new Form W-4 must be submitted each year by February 15 to maintain exempt status
- If no new form is received by that date, the employer must:
- Treat the employee as "Single" with no adjustments, or
- Use an older valid Form W-4 if one is on file that does not claim exempt status
Note: Exemption applies only to federal income tax. Employees must still pay Social Security and Medicare taxes, and any state or local taxes that apply
How to claim exempt on Form W-4
To claim exemption, the employee must:
- Complete Step 1(a) and 1(b): name, address, and Social Security number
- Skip Step 1(c), Step 2, and Step 3
- In Step 4(c), write "Exempt" in the space provided
- Complete Step 5: sign and date the form
How Check supports exemption tracking
Check provides a W-4 Exempt Status Report so Partners can monitor which employees have claimed exemption and when a new form is needed.
You can access the API documentation for this report in Check's API Reference.
Last updated on June 6, 2025