A teen would want to claim exemption from federal income tax withholding on their W-4 form if they meet both of the following conditions:

• They had no federal income tax liability in the previous year, meaning they received a full refund of any federal income tax withheld.
• They expect to have no federal income tax liability in the current year as well.

This situation typically applies when the teen's income is below the IRS standard deduction amount, so they do not owe federal income tax

. The benefit of claiming exemption from withholding is that no federal income tax will be withheld from their paychecks throughout the year. This means the teen will have more take-home pay each paycheck rather than having tax withheld that they would likely get refunded later. It also means they may not need to file a federal tax return if their income remains below the filing threshold and they have no tax liability

. However, Social Security and Medicare taxes will still be withheld even if the teen claims exemption from federal income tax withholding

. In summary:

• Claim exemption if the teen had no tax liability last year and expects none this year.
• Benefit: More money in each paycheck, no federal tax withheld unnecessarily.
• Must write "Exempt" on the W-4 form in the space below Step 4(c).
• Must submit a new W-4 each year if continuing to claim exemption

This helps teens who earn below the standard deduction avoid over-withholding and simplifies their tax situation.