@dmoe54 wrote:
I am retired with SS and a small pension. Schwab takes out the tax on my RMD. My understanding (from the forum) is that if I don't allow Schwab to deduct the tax, TurboTax will use my solar credit to pay it. If I owe more taxes, I will pay the additional tax when I submit my tax refund. Do I have that correct?
Withholding does not change your tax liability. Tax liability is what you actually owe to the IRS, what they keep at the bottom line.
Suppose your combined tax liability on your pension, social security and IRA is $3000. If Schwab withholds $3000, that covers your taxes, but your liability to the IRS is still $3000. Suppose Schwab withheld $4000--your liability is still $3000 and you get a $1000 refund. Suppose Schwab withholds northing--your liability is still $3000 and you owe a $3000 payment.
If you claim a solar credit, and your tax liability is $3000, the credit would reduce your liability to zero, and any remaining credit would carry forward. That would mean that if Schwab withheld $3000 and your liability was zero, you would get a $3000 refund. If Schwab had no withholding, your liability after the credit is still zero, and you would owe no payment but get no refund.
