NoSSN - Filing EXEMPT on a W4

Filing EXEMPT on a W4
February 14, 2001

There seems to be a lot of questions lately as to how to stop withholding in the workplace. There are certainly many schools of thought as most employers will not hire you without signing a W4 or they will withhold the maximum amount they can as the IRS will certainly tell them to do. Of course they don't want any trouble from the IRS.

One of the ways to get the employer from to stop withholding is to file EXEMPT on a W4. This is what Barrie Leslie Konicov will explain that you can do. many of you may have gotten his e-mails. I must comment that Barrie is a very smart individual which leaves me puzzled as to why he would encourage anyone to file EXEMPT. The truth is that filing EXEMPT is the wrong thing to do unless you are a full time student and wish to be a "Covered Employee". You should ONLY sign a W4 if you wish to be a "Covered Employee" for Social Security purposes. If you do not wish to participate in Federal welfare entitlement programs and socialist wealth redistribution should you sign a W4.

Most employers and their lawyers or the IRS will use CFR 31.3402 as their basis for withholding and requiring you to do so. Unfortunately few people have actually read it. Let's take a look shall we?

Sec. 31.3402(p)-1 Voluntary withholding agreements.
(a) In general. An employee and his employer may enter into an agreement under section 3402(b) to provide for the withholding of income tax upon payments of amounts described in paragraph (b)(1) of Sec. 31.3401(a)-3, made after December 31, 1970.

(b) Form and duration of agreement. (1)(I) Except as provided in subdivision (ii) of this subparagraph, an employee who desires to enter into an agreement under section 3402(p) shall furnish his employer with Form W-4 (withholding exemption certificate) executed in accordance with the provisions of section 3402(f) and the regulations thereunder. The furnishing of such Form W-4 shall constitute a request for withholding.

(c) A statement that the employee desires withholding of Federal income tax, and applicable, of qualified State individual income tax (see paragraph (d)(3)(I) of Sec. 301.6361-1 of this
chapter (Regulations on Procedures and Administration)), and (d) If the employee desires that the agreement terminate on a specific date, the date of termination of the agreement. If accepted by the employer as provided in subdivision (iii) of this subparagraph, the request shall be attached to, and constitute part of, the employee's Form W-4. An employee who furnishes his employer a request for withholding under this subdivision shall also furnish such employer with Form W-4 if such employee does not already have a Form W-4 in effect with such employer. (iii) No request for withholding under section 3402(p) shall be effective as an agreement between an employer and an employee until the employer accepts the request by commencing to withhold from the amounts with respect to which the request was made. (2) An agreement under section 3402 (p) shall be effective for such period as the employer and employee mutually agree upon.

However, either the employer or the employee may terminate the agreement prior to the end of such period by furnishing a signed written notice to the other. Unless the employer and employee agree to an earlier termination date, the notice shall be effective with respect to the first payment of an amount in respect of which the agreement is in effect which is made on or after the first ``status determination date'' (January 1, May 1, July 1, and October 1 of each year) that occurs at least 30 days after the date on which the notice is furnished. If the employee executes a new Form W-4, the request upon which an agreement under section 3402 (p) is based shall be attached to, and constitute a part of, such new Form W-4.

You can plainly see that there is no need to file EXEMPT. As a matter of fact, filing EXEMPT when you are not a full time student is fraud and the IRS will have an open invitation to throw the book at you. And if the book is the Internal Revenue Code it could hurt a lot.

In the last paragraph you can see that you may terminate your withholding agreement at any time. You may do so, your employer may do so. Ther is no question about it.

"The wages of the average American worker, after inflation and taxes, have decreased 17% since 1973, the only Western industrial nation to so
suffer." -- Martin Gross, author of "The Tax Racket: Government Extortion From A to Z"

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