Exemption Definition
An exemption is when an employee who meets specific qualifications is exempt from paying federal income tax.
Exemption Extended Definition
Employees can claim exemption from federal income tax withholding on Form W-4 if they qualify. If you have an employee who qualifies for complete exemption, do not withhold federal income tax from their wages.
An employee can claim exemption if they meet both of the following:
- Previous year: The employee had no tax liability and had the right to a refund of all federal income income tax withheld.
- Current year: The employee plans to have no tax liability and expects a refund of all federal income tax withheld.
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Last Updated By
Rachel Blakely-Gray | Apr 14, 2023
