Tax law changes

Hi psen, thanks for the event question.

There are different types of credits and payment in Form 1040:

Non-refundable credits, such as the EV credit, credit for dependent care;

Refundable credits, such as Earned Income Credits

Partially refundable credits, such as American Opportunity credit (an education credit.)

https://turbotax.intuit.com/tax-tips/tax-deductions-and-credits/what-is-the-difference-between-a-ref...

Once the income tax liability and other taxes are determined, the first group to apply is the "non-refundable credits" to reduce the tax liability up to zero. 

Then the refundable credits together with your payments (such as W-2 payroll withholding) reduce/erase the remaining tax liability or even create a tax refund.

Depending on your 2022 tax situation, the EV credit will be used in the first group against tax liability. EV credit not used cannot carryover to 2023.

Your payment via payroll either reduces the remaining tax liability or creates a refund for you.

Therefore, larger withholding creates a smaller balance due or larger refund;

smaller withholding creates a larger balance due or smaller refund.

Thank you and hope the above helps.