Sledge -- According to Sweetbeet's post (way up above) -- the credit is applied to your total tax liability for that year, not just the amount you still owe on April 15. This sort of makes sense but of course I'm going to check it with my accountant when I do my taxes in a couple weeks.

 

Huh?

You tax liability IS the amount you owe on April 15th.

For instance:
If you would have owed $2500 without the hybrid credit, you will owe $400 with it. (2500-2100=400)

If you would have gotten a $1000 refund without the hybrid credit you will get $3100 with it. (1000+2100=3100)

Withholding is just how much they withold from your check every week.
It has nothing to do with how much tax you will owe at the end of the year.
Withholding only affects how big your refund, or the check you must write, is.

 

I read his post. He says...

I had tax liability last year (aka I wrote the feds a check). If I keep everything the same, I will have tax liability this year. It sounds to me that I should adjust my W-4 to give the government $2000 less from my paychecks over the whole year.

 

You may not qualify for the tax credit if you have to use Alternative Minimum Tax. That may affect how you take income and use deductions during 2006- talk to your tax advisor.

 

Yes Kenny, your examples perfectly agree with what I'm trying to say--which I'll try another way to clarify what I mean by "total tax liability":

Supposing the IRS says: Kenny, based on your income and deductions I've figured your total tax liability for the year comes to $10,000 and you've withheld $9000, so you still owe me $1000 on April 15. But because you bought that sweet Honda hybrid, guess what, now your total tax liability for the year is now only $7900 ($10,000 - $2100 credit). So you get a refund of $1100 (7900 - $9000).

Changing your withholding only affects how much refund or payment is due come April 15. It doesn't change your total tax liability for the year.

 

Like Chewbacca on Endor, that does not make sense

 

Sounds like common sense to me.

 

Not true. The credit has nothing to do with your withholding. Whatever you owed or had coming to you without the credit, it will come out $2000 better with the credit. For example, if you would have had a $1000 refund coming, you'll get a $3000 refund instead.

 

This is what I'm trying to verify. If, for example, I owed the government nothing (my withholdings equalled my taxes perfectly), then after I apply the hybrid credit, they really will write me a check for $2k or so? That doesn't sound right to me. It doesn't sound like the IRS that I've come to know and despise

 

Withholdings are taxes you've had withheld and therefore paid to the government. Why would you think you won't receive a refund? If you're taxes are less than your withholdings (for what ever reason), you get a refund.