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this post was submitted on 04 Feb 2025
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I just explained why it made sense. I want my money back before the government functions suffer from Musk and trump.
Listen, I know you've got a tiny bit of conventional wisdom and need to share it, but understand that one-size-fits-all doesn't actually fit-all. When you don't consider things like this, you come off as not only wrong but arrogant because you'are so confident in your wrongness you're prescribing action when you don't even know the situation.
I am getting a refund because I installed solar panels on my house and there are tax credits in the Inflation Reduction Act that give me money back as in the form of credits against the tax I owe.
That you are getting solar tax credits doesn't change that you could have and should in the future adjust your withholdings. You knew you were going to get money back months ago but didn't change your withholdings.
Yes but how much? Was the project sure to have gone forward? Would there have been overruns? Have you not done project management before? Do you think its realistic to have perfect budgetary projections a year before even talking to a vendor?
The amount was fixed by the contract you signed. You knew what the tax credit was going to be because the salesman likely highlighted it as part of the sale. If you did it yourself, you'd have an every more detailed knowledge of the costs and timeline. Unless it was finished in December, you could have adjusted your withholdings.
I've done everything from $100 repairs on my house, $80k renovations, to multi million dollar business deals. Even the bat specialist who moved the bats out of my front required a contract.
It is completely absurd that you had an extremely unique tax situation ( tax credits on a project ending in December so no withholding adjustments could be made) yet your first post was authoritative general tax advice without mentioning it was specific to your condition. Then you had the nerve to call me out for giving general advice.
Are you saying you're submitting a new W-4 to your employer for even a withholding change that would benefit you for as little as $100? And multiples of them a year as your tax burden changes?
I don't even know what adjust your withholdings mean. America purposely keeps us stupid. Never have I been offered tax schooling or any thing once.
If you have an employer, you have money taking out of your paycheck every pay period to eventually go to pay your income taxes on your earnings. This money taken from you for taxes is withheld from you. This is why its called your "withholdings". Even though money is taken out of your check at regular intervals, you're not actually paying any income tax until you file your return next year.
You have some control over how much money is withheld from your paycheck. In a perfect world, you would adjust your withholdings so that the exact amount of money taken out (withheld) from each of your paychecks adds up to your total income tax burden for the year. You make these adjustments on the IRS W-4 document with your employer:
If you know exactly how much money you're going to make that year, and you know exactly how many tax deductions, write offs, write downs, credits, and prior payments you will have, you can set your withholdings to perfectly match how much you owe. This means when you file, you'll get $0 back, but also owe $0. However, there are penalties and fines if you grossly miscalculate and withhold too little. It also makes you more of a target for audit by the IRS in the years ahead.
For many of us knowing exactly what our tax burden is going to be more than a year from now is near impossible. For some that have not tax benefits and a steady fixed income, its much easier to calculate. I fall into the former category making it next to impossible for me to guess correctly.
I did get some education on this in my public high school, but didn't understand much of it when it was explained. It took me years of growing up in the working world to get the hang of it.
Thank you so much for the insightful post. This helped a lot.