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CoastMath figures each year’s total tax after that year’s withdrawals. It then subtracts what was already paid: withholding from income and any taxes you entered as paid earlier in the first year. The difference is settled in the same plan year. A refund is cash that year, and a balance due is paid that year from cash or withdrawals. Nothing carries into the next year.
Withholding therefore changes how a year’s cash flow is split between tax withheld and a refund or balance due. It doesn’t change balances, net worth or total tax.
Tax withholding (% of gross) on an income stream sets aside that share of the stream’s pay for the months it’s active. For a plan that starts partway through a year, enter taxes already paid that year under Earlier this tax year.
Refund (+) or balance due (−)=Tax withheld+Taxes paid earlier this year−The year’s total tax
A difference between the advance and final Marketplace credit is included here too.
| Tax withheld from salary | $15,000 | |
|---|---|---|
| − | Federal income tax | $13,170 |
| − | Payroll tax | $7,650 |
| = | Balance due, paid in 2026 | −$5,820 |
- Withheld during the year
- Paid (refunded) at settlement
Total tax is $20,820 in every case, and year-end net worth is the same.
Show data
| Withholding | Withheld | Settled at year end |
|---|---|---|
| None | $0 | $20,820 |
| 15% | $15,000 | $5,820 |
| 30% | $30,000 | −$9,180 |
A balance due comes out of the year’s cash flow. If that isn’t enough, it comes from withdrawals in your drawdown order. A withdrawal from a pre-tax account adds to the tax, so the tax is figured again with that withdrawal included. A refund follows your income allocation rules. It first fills any fixed-amount rule that was short that year, then goes to rules that take what’s left. Anything remaining goes to your cash account.
A real balance due for one year is paid by the next April. CoastMath settles it in the year the income is earned. So the tax on your last working year shows up in that year, and the year after retirement starts without a bill from the year before. A large Roth conversion or sale is taxed in the year you make it.
Federal tax is due as income is earned, through withholding or quarterly estimated payments. Plans with large Roth conversions, gain harvesting, self-employment or retirement income often have little withholding, and could owe an underpayment penalty. You choose whether CoastMath models this:
- Not modeled (the default): no estimates and no penalty.
- Pay the balance when filing: no estimates. If withholding falls short of the required annual payment, the penalty is estimated and paid with that year’s tax.
- Pay safe-harbor estimates: four equal payments bring withholding up to the required annual payment, so there’s no penalty.
- Pay projected federal tax in estimates: four equal payments cover the federal tax that isn’t withheld, so nothing federal is left to pay at filing.
Required annual payment=the smaller of90% × this year’s federal taxand100% × last year’s federal tax
110% instead of 100% when last year’s adjusted gross income was over $150,000, or $75,000 married filing separately. Without last year’s tax, only the 90% share applies; without its income, 110% is assumed.
Federal tax here is federal income tax, including the alternative minimum tax, plus self-employment tax, the net investment income tax and the 0.9% Additional Medicare Tax, after credits. Payroll tax on wages and state and local tax don’t count. Because one withholding percentage covers the whole bill, withholding first pays the payroll tax on wages; the rest is shared between federal and state tax in proportion to each. Withholding counts as paid evenly on the four due dates: April 15, June 15, September 15 and January 15.
A quarter that falls short accrues interest at the IRS underpayment rate (7% at the end of 2026; later years keep the latest rate) until it’s paid or until April 15 of the next year. There’s no penalty when the federal tax left after withholding is under $1,000, or when last year’s federal tax was $0. The penalty isn’t deductible. It’s included in the year’s taxes and shown separately.
| Federal income tax | $13,170 | |
|---|---|---|
| Required annual payment (90%) | $11,853 | |
| − | Withholding toward federal tax$15,000 withheld less $7,650 payroll tax | $7,350 |
| = | Safe-harbor estimates, four payments of $1,125.75 | $4,503 |
With Pay the balance when filing, the plan instead pays an underpayment penalty of about $207 and still owes $5,820 at filing.
The first year’s tax covers the whole calendar year. It includes income you entered as earned before the plan’s start date. Taxes paid before the start date are credited against that full-year tax. While that history is blank, the Overview shows Review tax history, and earlier income with its matching tax share is estimated pro rata from active plan streams. See Your plan’s start date and first year.
Marketplace premium credit. If the advance credit you entered differs from the credit on the year’s final income, the difference is part of that year’s settlement: extra credit adds to a refund, and excess advance credit is repaid with the balance due. See Marketplace coverage and premium tax credits.
Early-withdrawal additional tax. The 10% additional tax on retirement withdrawals before 59½, and the 20% on HSA withdrawals before 65 that aren’t for medical costs, are paid out of the withdrawal when it’s made. The withdrawal is enlarged to cover it. The amount is counted in the year’s total taxes and shown as Early withdrawal penalty. It’s never part of the refund or balance due. See Early withdrawal penalties and Roth ordering.