This year many of you are going to feel the pain when you file your taxes. I am really worried that a large number of tech workers are going to get a nasty surprise when they file their 2023 taxes this upcoming April. This is particularly true if you receive a significant amount of your total compensation in RSUs and your company had a major run up this year.
Thank you! Updated. I originally had a sentence talking about being able to use the Federal Withholding taxable wages but removed it for simplicity. I must have deleted the wrong reference box in the process.
Dec 15, 2023·edited Dec 15, 2023Liked by Andre Nader
Since the majority of folks who read this would be income earners > $150K I recommend calling out the safe harbor is 110% instead of 100%. Maybe add that sentence to avoid having folks still underpaying.
"Higher income taxpayers. If your AGI for 2022 was more than $150,000 ($75,000 if your filing status for 2023 is married filing separately), substitute 110% for 100% in (2) above. This rule does not apply to farmers and fishermen."
I always appreciate reading your content in my inbox and via X/Twitter!
I feel like I am over thinking this, but given some companies (like Alphabet) hold back RSUs when a vesting date hits, this shouldn't be as big of a concern right? For example, if 100 shares vest in
November, automatically ~35-40 shares are withheld to cover the taxes in that moment. If I already have a process in place to sell shares automatically after vesting date, any capital gains would be negligible as well.
The issue isn’t capital gains (like you said, if you sell on vest they are negligible). The issue is the amount kept for taxes isn’t always enough to cover federal taxes. There are lots of other taxes that are withheld, but at the federal level only 22% gets withheld.
I should bring in a specific example an rsu vest and how the auto held shares are broken down across tax types. I’ll work on that for a next post to be more clear.
Very useful, thank you! After two years getting surprises to the tens of thousands of dollars, I think I finally learned my lesson and adjusted the settings to be able to have a more reasonable tax bill (in my case, the RSU default of 22% was killing me).
Thanks for the blog. Wanted to point out that the "YTD Federal Tax withheld" is highlighting the wrong field in your example Meta paycheck.
Thank you! Updated. I originally had a sentence talking about being able to use the Federal Withholding taxable wages but removed it for simplicity. I must have deleted the wrong reference box in the process.
Since the majority of folks who read this would be income earners > $150K I recommend calling out the safe harbor is 110% instead of 100%. Maybe add that sentence to avoid having folks still underpaying.
From IRS publication -> https://www.irs.gov/publications/p505
"Higher income taxpayers. If your AGI for 2022 was more than $150,000 ($75,000 if your filing status for 2023 is married filing separately), substitute 110% for 100% in (2) above. This rule does not apply to farmers and fishermen."
Same applies to 2023 I think
TY! I missed that. Updated the post.
I always appreciate reading your content in my inbox and via X/Twitter!
I feel like I am over thinking this, but given some companies (like Alphabet) hold back RSUs when a vesting date hits, this shouldn't be as big of a concern right? For example, if 100 shares vest in
November, automatically ~35-40 shares are withheld to cover the taxes in that moment. If I already have a process in place to sell shares automatically after vesting date, any capital gains would be negligible as well.
Tell me I am not crazy!
The issue isn’t capital gains (like you said, if you sell on vest they are negligible). The issue is the amount kept for taxes isn’t always enough to cover federal taxes. There are lots of other taxes that are withheld, but at the federal level only 22% gets withheld.
I should bring in a specific example an rsu vest and how the auto held shares are broken down across tax types. I’ll work on that for a next post to be more clear.
Very useful, thank you! After two years getting surprises to the tens of thousands of dollars, I think I finally learned my lesson and adjusted the settings to be able to have a more reasonable tax bill (in my case, the RSU default of 22% was killing me).
I was stressed out the first time. Certain I messed up entering my information into turbo tax.