My understanding of the underpayment penalties is that generally you are exempt from penalties as long you pay either 90% of this year's tax owed through witholding, or 100% of last year's tax owed, and that there are no exceptions for this except for certain self-employed or high-income workers, neither of which apply to me.
I am in a situation where I only worked a paid internship last year, and through tax credits and deductions my total tax bill on last year's return was $0 (I received a refund for everything that was withheld last year). Since 100% of last year's tax owed would concordantly be $0, then does that basically mean that I don't have to have anything withheld this year, and I can simply pay my taxes in full next April?
I've already had money withheld this year (so I don't have $0 withheld), but do I need to withhold any more to avoid penalties? Should I file a W-4 that says I'm exempt from federal taxes or claim some absurd number of allowances? My understanding is that I could, but that seems odd since virtually everyone starting working for the first time would not have to withhold anything and could simply pay their taxes in full with their federal tax return filing.