Individuals may be able to mark Form W-4 as "exempt" under certain circumstances, according to the Internal Revenue Service. The taxpayer has to have had a refund of all income tax withheld the previous year and has to reasonably expect a full refund of all current year withholding.
Students and retirees with part-time jobs are not automatically exempt from income tax withholding. A number of factors are taken into consideration, including filing status, dependency status and whether the taxpayer itemizes deductions. A taxpayer who is exempt from withholding may still have to file an income tax return, the IRS notes. A complete discussion and helpful chart can be found in IRS Publication 505.