averie_eve OP t1_iu97f51 wrote on October 29, 2022 at 3:18 PM

Reply to comment by rnelsonee in Employer not withholding federal taxes... why? by averie_eve

So if I'm paid an hourly rate of $14, and I always work 40 hours per week, paid biweekly, and I'm claiming 2 kids ($4,000 on Step 3 on my W-4).. I'm never actually going to have a paycheck that exceeds $55,000/(number of pay periods). My paycheck is never going to exceed that number. So I literally will just never have federal taxes withheld? And I won't be penalized come tax time?

I think I understand the reasoning, it's just so weird to me lol.

rnelsonee t1_iu985e3 wrote on October 29, 2022 at 3:24 PM

You got it. Say you make $14×40×52 = $29,120 for the year. Subtract $19,400 standard deduction. 10% of the $9,720 left is $972. That's your tax before credits.

Now subtract credits; it's not $4,000 since your lower income lowers it, but you get Earned Income Tax Credit with that low income, so I'm computing $6,700 "refund" even though you paid $0.