The Withholding Gap That Quietly Eats Your RSUs

If you had a surprise tax bill this April, you're not alone. Almost every RSU-earning client I see walks in under-withheld by roughly 10 percentage points on their vest income — and most of them had no idea until it was too late to fix it.

What's actually happening

When your RSUs vest, your employer is required to withhold federal income tax. The default rate is 22%. That's fine — if your marginal rate is 22%. But if you're an Eastside tech professional at $300K+ TC, your actual marginal rate is more like 32–37%. That 10-point gap adds up fast on a $100K vest.

A $150K vest under-withheld by 10 points is $15,000 of tax you still owe — with interest if it crosses safe-harbor thresholds.

The fix

• Ask payroll to apply supplemental withholding at a higher rate (many employers allow this).
• Make a quarterly estimated payment to IRS Direct Pay the week after each vest.
• Or: bump your regular W-4 withholding up by a fixed amount per paycheck — spread the burden across the year.

Any of the three works. The point is to stop pretending the 22% default is good enough. It isn't.

What I do with clients

We build a one-page cash-flow forecast that treats every RSU vest as a 'tax event' first and a 'cash event' second. The withholding gap gets auto-reserved into a separate account the day the vest hits. No more April surprises.