[PeterPrinciple]

delighted to get a $2500 return. Then he figured his 2022 taxes and learned he was getting only $5 back. He was quite upset.

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A lot of peoples thoughts are based on the size of the refund. Some even think they pay no taxes if they get a refund.

[MD Expat in PA]

Some even think they pay no taxes if they get a refund.

Working in corporate PR I run into his quite often. A new hire claims Exempt on their W4 so as a matter of curtesy I reach to them to explain that claiming Exempt means no federal tax will withheld but their federal taxable income will be reported on their W2.

I think this happens because the instructions say “You may claim exemption from withholding for if you meet both of the following: conditions: you had no federal income tax liability in 2022 and you expect to have no federal income tax liability in 2023”

They think this means if they owed no additional federal tax when they filed or got a refund, this means they didn't have any liability, so I explain what it really means. Of course, if they want to claim Exempt, that’s up to them. But then in April of the following year I get a call asking why they ended up owing so much or got a lock in letter.