If an employee qualifies, Form W-4 (PDF) is also used by the employee to tell you not to deduct any federal income tax from his or her wages. To qualify for this exempt status, the employee must have had no tax liability for the previous year and must expect to have no tax liability for the current year.orm W-4 tells you, as the employer, the marital status, the number of withholding allowances and any additional amount to use when you deduct federal income tax from the employee's pay.