Am I required to have Federal Income Tax withheld from my pay?

If I claim exempt from withholding, do I still need to file Federal Income Tax return and pay taxes?

Public Comments

P, There's a few factors that are needed before you can get an accurate answer. Are you self employed? The amount of AGI earned while self employed is a deciding factor. Basically the need info is -is it income reported on a 1099 or W2 -how much did you make Bottom line is that you should always file. If you do not, then you are cutting out a year of earning credits from your future social security benefits. You may have the though "SS won't be there when I retire" I'm not even going there, but if you become disabled and begin to receive SS disability, the amount of money you receive will be based on the SS taxes. SO, bottom line...file your taxes. Plus this year the exemption amounts have been raised as well as the EIC...earned income credit.
If you are single and can't be claimed as a dependent on anyone else's tax return, you must file a return if you made over $8,750 in the year, regardless of how much taxes were taken from your paycheck, or what you claimed on your W-4. Claiming exempt on your W-4 does not automatically mean that you don't owe taxes, or that you don't need to file a return. That form is simply to report to your employers how much to withhold from your paycheck. If you do claim exempt, and you do make more than $8,750 in the year, you will owe the IRS for all the taxes that should have been withheld from your paychecks.
You actually DON'T have to, but you're going to pay it in the end, so it's better to have it taken out all along rather than get hit with it at one time, come tax time. I was a consultant, and filed as a 1099, which meant I didn't pay the Fed UP FRONT...but, boy, did I pay in the end. You can also pay by sending in quarterly payments, as well...options, options.
You can claim exempt from withholding if you fall under the rules relating to the exemption. However, that does not exempt you from filing a tax return. In fact, if you claim exempt from withholding, prepare your return and it is determined that you owe taxes, you could be charged a penalty for underpayment of taxes.