Yes you sell enough stock to cover the taxes if paying the taxes and holding onto the stock puts you too much out of pocket

I have the same problem as OP - I am lucky to have had 80k of stock vest this year but I owe 10k to the IRS now. Second year in a row of this. What do people do when it’s a really good stock (up 400% from when I was hired) but it’s really throwing off your taxes? Should I at least cash out enough per year to cover the taxes? Technically I can afford it but it seems silly to offset savings.

I understand I can just adjust my withholding but that doesn’t change the fact that money is diverting from my pocket for the time being. And I have two kids in daycare so I will notice nearly $1k per month.

Am I missing something obvious that let’s other people avoid this? Prior to this job I was paycheck to paycheck so rich people problems are a mystery to me.

Anonymous wrote:

Anonymous wrote:I just take the cash hit - the more I sell the more taxes I owe. The stock has trended very up for the past 15 years. Everything else I invest I keep away from my sector.

If you sell on vest you don’t pay any more taxes.

This, it makes no difference. You already paid the income tax from withheld shares. Only price movements after vesting affect taxes

Anonymous wrote:I just take the cash hit - the more I sell the more taxes I owe. The stock has trended very up for the past 15 years. Everything else I invest I keep away from my sector.

If you sell on vest you don’t pay any more taxes.

We always up our withholding to be in the safe harbor.

I just take the cash hit - the more I sell the more taxes I owe. The stock has trended very up for the past 15 years. Everything else I invest I keep away from my sector.

Anonymous wrote:Thanks. But I have plenty outside my company stock holdings.

Then covering the amt that you have artificially “locked up” should be no problem! But it is smarter to diversify.

Thanks. But I have plenty outside my company stock holdings.

Anonymous wrote:

Anonymous wrote:Ours do 27% + mcare + state

I’m always spot on for state but per extra for Medicare and a ton extra for federal - like 15-20k and I boost my withholdings by like 1k per paycheck too. What really sucks is I rarely sell stock so I’m paying taxes in real money on comp that’s locked up in stock.

I’m sure there are a million tiny violins playing for me.

Choosing not to sell is not "locked up".

it's also a great way to end up poor.

the million tiny violins are actually trying to tell you to sell to cover on vest, PP and to rebalance your damn portfolio.

Anonymous wrote:Ours do 27% + mcare + state

I’m always spot on for state but per extra for Medicare and a ton extra for federal - like 15-20k and I boost my withholdings by like 1k per paycheck too. What really sucks is I rarely sell stock so I’m paying taxes in real money on comp that’s locked up in stock.

I’m sure there are a million tiny violins playing for me.

Choosing not to sell is not "locked up".

Ours do 27% + mcare + state

I’m always spot on for state but per extra for Medicare and a ton extra for federal - like 15-20k and I boost my withholdings by like 1k per paycheck too. What really sucks is I rarely sell stock so I’m paying taxes in real money on comp that’s locked up in stock.

I’m sure there are a million tiny violins playing for me.

Anonymous wrote:Most companies withhold taxes for stock vests at a flat 22% rate for federal plus Medicare and state taxes. That is what the government requires as a minimum. Some companies allow supplemental withholding so you can get closer to your actual tax rate.

This is 100% correct. We allow employees to increase minimumbl withhold requirement from 22% to the highest supplemental federal tax rate, but it’s one-time election per CY year that cannot be changed during the CY. Employees can opt to have the highest fed tax rate withheld for supplemental income each CY or not

Most companies withhold taxes for stock vests at a flat 22% rate for federal plus Medicare and state taxes. That is what the government requires as a minimum. Some companies allow supplemental withholding so you can get closer to your actual tax rate.

They use a formula. You can change your with holdings prior to the pay cycle run.

I just had some RSUs vest and only 35% was taken out for taxes. I’m in the 35% marginal bracket so that’s ignoring Medicare and state tax. I always end up owing 5-10k in taxes every April ever since I started working for this company. Pay is sort of irregular, 50% of compensation comes from bonuses and stock vests. I’m now withholding an extra 1k a month from my base pay to hopefully prevent me owing anything this year. How do companies decide the amount they take out of bonuses and RSUs? This is a big tech company.