My husband started a new job in July. He is making less money than his previous job and he was told that he did not have to have taxes taken out because he had already paid enough in.

I am worried that this will come back to haunt us come tax time next year. Does this sound legitimate?
Thanks!

It does not sound right to me. His employer should be withholding taxes based on the amount that they pay him. Whether it's the correct amount or not is between your husband and the IRS, to be settled when he files his tax return next year. In the mean time, your husband should make sure he has submitted a proper W-4 form to his new employer. Come January you do not want to find out that not enough taxes were withheld, as you will the have to come up with cash to pay the IRS, and may have to pay interest on the underpayment as well.

Ebaines has a good point.

However, regardless of how much was taken out at the preious job, FICA (Social Security @ 6.2% and Medicare @ 1.45%) taxes MUST be withheld, because these are flat taxes.

If NONE of these taxes are being withheld, then your spouse is being treated like an independent contractor and HE has to make arrangements to pay taxes on a quarterly basis less you both suffer a VERY nasty surprise come 15 April 2009.

My husband started a new job in July. He is making less money than his previous job and he was told that he did not have to have taxes taken out because he had already paid enough in.

I am worried that this will come back to haunt us come tax time next year. Does this sound legitimate?
Thanks!

It appears that employer is treating your husband as independent contractor. If he is an employee, the employer must deduct Social Security and Medicare taxes.
Read W2 vs 1099-misc (employee vs independent contractor) Your U.S. Tax Return: W2 vs 1099-Misc: Employee vs Independent Contractor. (http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html)