Question

Bob is married, and his spouse is employed part-time making less than $1,000 per year. They have three dependents. Bob just started a new job and needs to complete his W-4.

Explain the types of withholding allowances Bob may claim for income tax purposes and the purpose of the W-4 form.

Under what conditions would Bob be exempt from withholding of federal income taxes in 2016

How would Bob indicate a no-tax-liability status if he qualifies for exemption

Answer 1

1.

Below are the types of withholding allowances Bob can claim:

a. Child tax credit: If Bob's dependents include children below the age of 17 years. Then Bob can claim this allowance, based on his income.

b. Other dependents: Bob can claim credit for other dependents based on his total income.

2,

Bob would be exempt from withholding taxes only if he believes that there will be "0" tax liability for the period in question based on the calculations and allowances in form W-4.

3.

If Bob's income is low and the amount of tax liability on such income is set off against the allowances claimed by him like child tax credit and credit for other dependents, then Bob would indicate that there is no tax liability to his employer through Form W-4.