What does exempt status mean on the W4 form?

Answer 1

Exempt status may be claimed on a 2010 W-4 if two conditions exist:

1. You did not have a tax liability in the prior year and therefore received a refund of everything that was withheld, and

2. You expect to have not tax liability this year.

Caution: Having no tax liability is not the same as owing no tax. If your tax withholding was $1,000 last year and your tax liability was $400 then you owed no additional tax. You received a $600 refund. But your tax liability was $400.