Circular E

• Employers use Circular E or Publication 15 from the IRS for calculating taxes. This publication guides the employer and provides tax tables for withholding. Tax tables base withholding on if the employee is single or married and how often the employer issues paychecks. A weekly paycheck requires withholding on less income than a monthly paycheck. Low income will result in no tax withheld.
  
  

Calculations

• With a weekly payroll in 2011, an employee who claims "single" on the W-4 form can earn $40 a week with no taxes withheld. An employee claiming "married" status can earn $152 without taxes withheld. On a monthly payroll, the single employee can earn $175 without taxes withheld. The married employee can earn $658 a month without the employer withholding taxes.
  
  

Exemption

• If you owed no income taxes last year and expect to owe none this year, you may claim an exemption from taxation on your Form W-4 filed with your employer. This exempts the employer from withholding taxes from your paycheck, even if you make more than the Circular E calculations allow. You must file a new W-4 by February 15 each year to continue this exemption with your employer. Otherwise, a Form W-4 remains in effect until you provide the employer with a new one.
  
  

Independent Contractors

• Another circumstance with no tax withholding is the independent contractor. If you work for someone as an independent contractor and not as an employee, you complete Form W-9 for the business. You have no taxes withheld and do not receive a Form W-2 at the end of the year. You receive Form 1099-MISC and are responsible for your own taxes. Contractors who anticipate owing more than $1,000 in taxes each quarter must file a quarterly estimated tax return with the IRS, submitting the estimated tax each quarter.