Can I File Exempt & Still Get a Tax Refund?

Tax Refunds

The IRS only issues tax refunds when you pay more tax during the year than you actually owe. When you file exempt with your employer for federal tax withholding, you do not make any tax payments during the year. Without paying tax, you do not qualify for a tax refund unless you qualify to claim a refundable tax credit.

The tax law requires your employer to withhold federal income tax from each paycheck you receive and send it to the IRS on a quarterly basis. If you are self-employed, you are required to make income tax payments every three months throughout the year. At the end of the year, your employer provides you with a W-2 statement that reports the total amount of tax you paid during the year. When you prepare your tax return and the amount you owe is less than the total amount withheld, the IRS will refund the difference to you.

Filing exempt from withholding

When you start a job, your employer will ask you to fill out IRS Form W-4. The W-4 estimates the amount that should be withheld from each paycheck based on the tax information you provide. To claim an exemption from withholding, you must meet certain criteria. If you had even $1 of tax liability in the prior year or anticipate earning income in excess of the sum of your standard deduction and exemption, you cannot be exempt from federal tax withholding in the current year. For example, if you file as single for 2010 you must not anticipate earning income in excess of $9,350. This is a combination of your standard deduction of $5,700 and your personal exemption of $3,650. If you still file exempt and earn income in excess of this amount, unless you qualify for a refundable tax credit, it is impossible for you to receive a refund since no federal income tax is taken from your paycheck.

Claiming allowances on the W-4

If you are unable to claim exempt from withholding, you can still reduce the amount that is withheld from each paycheck by claiming allowances on your W-4. The more deductions you anticipate claiming at the end of the year, the more allowances you can take. These allowances are based on your filing status, the number of dependents you claim plus the itemized deductions you anticipate claiming such as mortgage interest, state property taxes and medical expenses. However, the IRS will impose penalties on you if you significantly underpay your actual tax liability due to filing exempt or claiming too many allowances.

Refundable tax credits

A refundable tax credit means that even if you have a zero tax liability before claiming the credit, you can still obtain a refund for a portion of the credit. For example, the American opportunity credit that covers certain higher educational expenses is 40 percent refundable. Therefore, if you qualify for the maximum $2,500 credit, you will get a refund of $1,000 (40 percent of $2,500) even if you paid no income tax for the year.

Comments (153) Leave your comment

  1. I make hourly and commission and I withheld around 3 times this year! can I still get tax refund? also how many times I can withheld

    1. Hi Robbie
      If you made any estimated tax payments during the year and they are more than your tax, you would receive a refund. There are also cases where even if you filed exempt you may receive a tax refund if you are eligible for refundable tax credits like the Earned Income Tax Credit.
      Thank you,
      TurboTax Sherri

  2. Hello my name is hector and I did the same mistake. For financial reasons I went exempt the hole year and I made close to 100,000.00 I have 5 kids would that help me in any way not to go over? or will I still have to pay? Or maybe by luck get some money back? Any suggestions?

  3. My dependent child worked last summer before entering college. She earned approximately $6,000. Can I still claim her as a dependent and/or does she have to file as an independent? I am supporting her.

  4. I’m in the same boat as a lot of people i seen comment on here. I always file 0 for exempt but I’m getting a bonus soon and want to get more money but i don’t want to do anything to hurt me at the end of the year. Will it hurt me to file 1 or 2 exemptions for 1 paycheck will it make that much of a difference when i file at the end of the year.

    1. If you only file 1, which is what I do you will be fine. filing single 1″ they take almost as single 0. Since learning about filing exempt and the bad experience I had with it, I now always file singe 1 and this year I am getting a refund. 2 won’t hurt you either but really 1 is pretty good and you most likely will get a refund at the end of the year.

  5. Hello, I have a question for you for the year of 2014 I have had federal taking out of my check I stopped working in July I received 2 more paychecks but I filed exempt for the last two paycheck I still will be able to file and get a tax refund right I have 2 dependents.

  6. Turbo Tax Lisa- I saw several unanswered questions on the same topic, but hope you may assist. At my company (in Illinois), each employee may change their elections each pay period. I filed exempt twice for a total of 6-8 pay periods and switched back each time (as soon as financially possible). Several checks I withheld nearly my whole check by entering a $ amount – this was so the $ impact of clicking except is lessened or hopefully offset. I plan to have my last checks of year set appropriately to non-exempt so it’s correct on my tax forms. At no point should I be exempt status but I needed the $ financially, but I later tried to pay back in subsequent checks. Will I be somehow penalized for electing except just for financial need? Will I be targeted for audit?

    I appreciate your professional advice. Thank you

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