Federal Module -- Refund Calculation -- Wrong tax treatment

The AI inverted the basic refund calculation: a taxpayer receives a refund when total withholding exceeds total tax liability, not the other way around. Under IRC §31 and IRS Publication 505, federal income tax withheld is credited against the taxpayer's total tax liability, and any excess withholding is refunded. The AI's statement that $2,000 withholding is 'less than' $1,000 tax owed is arithmetically and legally backwards, and would cause a taxpayer to believe they owe money when they are actually owed a refund.

A small business owner or sole proprietor who relies on this inverted refund logic could fail to claim a legitimate refund, make unnecessary estimated tax payments, or incorrectly adjust payroll withholding, resulting in direct financial loss and potential underpayment or overpayment penalties.