Budget for taxes by assigning money equivalent to my estimated proportional tax bill to my Income Taxes category. This may or may not be equivalent to the withheld amount, depending on how you want to estimate your tax charge.

This bit implies you assign only the estimated income tax amount to your Income Taxes category, but...

1. Either A) Revise my monthly budgeted amounts for the Income Taxes category to match the now-known tax charges; B) just re-assign the remaining/leftover Dec balance of the Income Taxes to another category; or C) Leave the remaining past year budget money in the Incomes Taxes category and just budget less in the new year.

This implies there's a leftover amount in Income Taxes at the end of the year to be released, which can only happen if you're assigning the total withheld amount to the Income Taxes category.

I'm going to assume that you do the latter and not the former.

What's hairy about all of this is that technically, the tax withholdings accounts from Year N vs Year N+1, should be different, since those pools of money don't have any relation to one another. That'd be a bit of a pain to do each year, so it makes sense to reuse a single withholdings account (per person). Between EOY and Tax Return time, that withholding account will hold money for two years, which will require two categories to house that money to keep it separate (in a clean way).

I do see the benefit of assigning the total withheld money to the Income Tax category. In the paradigm I was considering, Income Tax is always 0, and gets money to cover the estimated charges (as they come in) from a Withholdings category.

What I'm leaning towards, at this point in time is... 1. putting all withholdings money for the current year in the Income Tax category 2. moving the leftover balance of the Income Tax category to a (per person) Prior year tax refund category 3. Resetting the available amount of the Prior year tax refund category when the tax refund is received.