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Employee Tax Withholding Exemptions

Employees can be exempt from taxes for a number of reasons. Individual situations can differ, but here are a few general guidelines for eligibility for full exemption.

  • Foreign nationals who are working in the US under a F-1, J-1, M-1, Q-1, or Q-2 visa are exempt from paying Social Security or Medicare taxes. They should not have withholding for Social Security and Medicare.
  • Family employees of certain types of businesses are sometimes exempt from particular taxes. For example:
    • Children under 18 who work for their parents may be exempt from Social Security or Medicare and FUTA taxes.
    • Individuals employed by their spouse may be exempt from FUTA taxes.

IRS regulations state that individuals who wish to claim exemption from federal income taxes must meet both of the following criteria:

  • For the prior year, the individual had a right to a refund of all federal income tax withheld because they had no tax liability, and
  • For the current year, the individual expects a refund of all federal income tax withheld because they expect to have no tax liability.

Zenefits does not offer tax advice. Please consult a tax advisor to determine whether a particular employee qualifies for exemption from taxes.

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