Last year my son had an internship with a large company. He received his w-2. State and local taxes were withheld and paid but there was no federal tax withheld. Is he liable to pay the federal on his own? Why would they not withhold federal tax?

He IS liable to pay federal, state and local income taxes, but his income is so low the combination of his personal exemption and standard deduction may offset his internship pay and thus make no taxes due.

He DOES need to file the tax returns. You should model the return to see if he even need to claim his own exemption, because (I suspect) that you claim him on your tax return.

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