How does tax withholding relate to total tax liability?

At the end of each simulated year, ProjectionLab computes your total tax liability based on everything that happened in that year. Total tax liability is reflected in the Total Taxes expansion panel in the yearly summary pane:

Total tax liability is also used for the breakdowns and visualizations on the Tax Analytics page:

However, total tax liability is not what you’ll see in the Sankey cash-flow chart. That chart depicts the underlying flows that occur like tax withholding, tax return payments and refunds.

While tax liability is computed at the end of each simulated year, whether or not any tax actually gets collected and remitted during that year depends on how you have set up tax withholding on your income sources, which you’ll find in the Tax Handling subsection of the Income form.

For example:

After each year, ProjectionLab reconciles the total computed tax liability with how much tax withholding actually occurred, and then in the subsequent year you’ll either see a tax return payment or refund. This is mainly to try to mirror how things work in the real world, particularly in the US.

If you’d like to see an option added to automatically compute and withhold exact taxes right away instead, here is an item on the public roadmap you might like to upvote and comment on.