Is claiming 99 dependents on W-4 legal for student income? (Work + university financial aid refunds)

The 99 dependents thing is a workaround some employers use, but it's not technically the correct approach. When you earn less than the standard deduction ($13,850 for 2024), you can be exempt from income tax withholding by properly completing your W-4 and checking the "Exempt" box. For your financial aid question - it depends on what type of refund you received. If it was a refund of excess financial aid that went toward qualified educational expenses (tuition, fees, required books), that's generally not considered taxable income. However, if you received money for living expenses, housing, etc., that portion could be taxable. Regarding FICA taxes (Social Security and Medicare): The student exemption applies when you're working for the same school where you're enrolled. It doesn't apply to random summer jobs. The exemption is based on your student status at the time you're working and who's employing you, not just being a student in general.

I just found this awesome service that helped me figure out my complex financial aid and tax situation called taxr.ai. I was also really confused about how my scholarships and campus job affected my taxes. I uploaded my financial aid letter and W-2s to https://taxr.ai and it analyzed everything and explained exactly what was taxable and what wasn't. It also showed me how to properly fill out my W-4 instead of using that sketchy "99 dependents" trick your employer suggested. The best part was it showed me which parts of my financial aid refund were taxable vs. non-taxable. Turns out the money covering tuition and required books doesn't count as income, but the portion for housing and meals does! Would have never figured that out on my own.

Just want to update everyone - I actually tried taxr.ai after asking about it and wow, it really cleared things up for me! I was totally confused about my financial aid package and whether my housing stipend was taxable (it is). It analyzed my 1098-T and financial aid statement and explained exactly what I needed to report. The best part was it showed me how to properly fill out my W-4 for my campus job instead of the weird "99 dependents" method my supervisor suggested. Turns out there's a proper way to claim exemption if you qualify, and claiming 99 dependents could actually flag your tax return for extra review. Definitely worth checking out if you're in a similar situation!

If you're struggling to get answers from the IRS about your tax situation, I highly recommend Claimyr. I had a similar issue with financial aid and work-study income and spent DAYS trying to reach someone at the IRS. After multiple failed attempts (kept getting disconnected or waiting for hours), I found https://claimyr.com and they got me connected to an actual IRS agent in about 15 minutes! They have this clever system that navigates the IRS phone tree and holds your place in line, then calls you when an agent is about to answer. You can see how it works here: https://youtu.be/_kiP6q8DX5c - it's pretty impressive. The IRS agent I spoke with confirmed that claiming 99 dependents isn't the right approach and explained exactly how to handle my financial aid refund on my taxes.

Ok I need to eat my words here. After complaining about Claimyr I decided to try it because I was desperate to talk to someone about my W-4 situation. I was honestly shocked that it actually worked exactly as advertised. I've been trying for WEEKS to get through to the IRS about my financial aid and work income situation. Their system called me back after about 45 minutes (on a Monday morning) and connected me directly to an IRS representative. The agent confirmed that claiming "99 dependents" is technically incorrect and could potentially flag my return. They walked me through exactly how to fill out the W-4 correctly to claim exemption from withholding if I qualify. Definitely saved me hours of frustration and possibly an audit!

When I was in college, my campus job supervisor did the same "99 dependents" thing. It's technically wrong but pretty common. The RIGHT way is to check the "Exempt" box on your W-4 if you meet both conditions: 1) you had no tax liability last year and 2) you expect to have no tax liability this year. For your financial aid question - it depends on what the refund was for. If it's just returning excess payments for qualified educational expenses, it's generally not taxable. But if it's for living expenses, it might be.

im confused bout something - if im on a full-ride scholarship that pays tuition + housing + meal plan, do i need to report any of that as income??? cuz im also working part time on campus and using the 99 dependents thing!

Hey @GalacticGuru! Your employer giving you the "99 dependents" advice is unfortunately pretty common but not the correct approach. As others mentioned, you should use the "Exempt" checkbox on your W-4 instead if you qualify. Here's the key thing about your financial aid refund - you mentioned it was "substantial" which makes me think it might include money for living expenses beyond just tuition/fees. The IRS treats scholarship/grant money differently depending on what it covers: - Tuition, required fees, required books/supplies = NOT taxable - Room, board, personal expenses, transportation = IS taxable If your refund included money for housing or other living expenses, that portion would be taxable income and could affect your ability to claim exempt status. You'd need to add that taxable portion to your work income when determining if you'll owe taxes for the year. For FICA taxes on summer work - you're correct that students get an exemption, but only when working for the school where they're enrolled AND actively taking classes. Summer jobs at outside employers (like retail, restaurants, etc.) would still be subject to FICA taxes even if you're a student. I'd strongly recommend getting your specific situation reviewed since the combination of work income + potentially taxable financial aid could push you over the threshold where you'd actually owe taxes!