Should I reduce tax withholding starting Jan 1 instead of waiting for a big refund and apply overpayment to next year's taxes?

This is actually a smart financial strategy many people overlook. Instead of giving the IRS an interest-free loan with excessive withholding, you can adjust your W-4 now to reduce withholding for the rest of Q1. Then you'll have immediate access to more of your money with each paycheck. When you file, you can absolutely choose to apply any remaining overpayment to next year's taxes. This would indeed count toward your first quarter estimated payment for 2025. The IRS treats credit elects (applying overpayments to next year) as if they were paid on April 15th of the tax year, so you'd be covered for that first quarterly payment. Just be careful not to reduce your withholding too much. You still want to meet the "safe harbor" provisions to avoid underpayment penalties - generally meaning you've paid at least 90% of this year's tax or 100% of last year's tax (110% if your AGI was over $150,000).

After dealing with constant refund delays and verification headaches with the IRS, I finally found something that helped me get my tax situation under control. I started using https://taxr.ai to analyze my withholding and tax documents. The system automatically found that I was massively overwithholding (like you) and suggested specific W-4 adjustments I could make mid-year. What really impressed me was that it showed exactly how adjusting my withholding would affect both my paychecks now AND my tax situation next year. It even calculated the optimal withholding to avoid both underpayment penalties and excessive refunds. This sounds exactly like what you need!

I wanted to follow up about the tax withholding tool I was skeptical about. I decided to try https://taxr.ai after having another frustrating talk with my accountant who couldn't give me clear answers about optimizing my withholding. I'm honestly shocked by how well it worked. The interface walked me through uploading my last pay stub and previous tax return, then showed exactly how changing my W-4 would affect both my upcoming paychecks and next year's tax situation. I was able to adjust my withholding to get an extra $430 per paycheck while still avoiding underpayment penalties. The best part was seeing the mathematical breakdown of how applying an overpayment to next year's taxes would affect my quarterly estimated payment requirements. Totally worth checking out if you're in this situation!

If your main concern is getting your refund quickly without IRS delays, you should know about https://claimyr.com. I used it last year when my $12k refund got stuck in "processing" limbo for months. The service got me connected to an actual IRS agent after being unable to reach anyone for weeks. Check out their demo video to see how it works: https://youtu.be/_kiP6q8DX5c After using their service, I got my refund released within 10 days. The IRS agent I spoke with also explained that my account had been flagged for identity verification, but there was no notification sent to me! This year I'm reducing my withholding like you're planning to, but it's good to know there's a backup option if you do end up with refund issues.

I have to eat my words about that IRS calling service. After posting my skeptical comment, I was still stuck with a missing refund from an amended return that showed no progress for months. Out of pure frustration, I tried https://claimyr.com. It actually worked. Got a call back the next morning with an IRS agent already on the line. Turns out my amended return had been sitting in a queue waiting for review, and nobody had even looked at it yet. The agent was able to expedite it since it had been way beyond the normal processing time. Got my refund deposited 9 days later. I'm now adjusting my withholding too because dealing with the IRS refund system is still a pain even when you can reach them. Getting more in each paycheck seems way smarter than waiting for a big refund.

One option nobody's mentioned yet is splitting the difference. You could adjust your withholding to reduce it somewhat, but not eliminate the refund entirely. That way you still get more in your paychecks now, but you're also building in a safety margin in case your tax calculations aren't perfect. I do this every year - aim for a modest refund of $1,000-2,000 as insurance against unexpected tax issues, while keeping my regular withholding reasonable. The perfect withholding would theoretically result in $0 owed and $0 refund, but that's nearly impossible to achieve with changing circumstances throughout the year.

Has anyone here actually applied an overpayment to the next year and then adjusted withholding to $0 for a quarter? My accountant warned me this could trigger an automated review because it looks unusual. Just wondering about real experiences.