The Bonus & RSU Playbook

RSUs are taxed as ordinary income the moment they vest. The IRS default supplemental withholding rate is 22% federal. If your marginal rate is 32%, you're roughly 10 percentage points short on every vest.

The remedy options, in order of simplicity:

• Ask payroll to apply a higher supplemental rate (some employers support this).
• Sell enough shares at vest to cover the gap (a "sell-to-cover" with a surplus).
• Make a quarterly estimated payment to IRS Direct Pay the week of the vest.
• Adjust your regular W-4 to withhold an extra fixed amount per paycheck across the year.

Any of these works. The goal is to not owe more than the safe harbor (110% of last year's tax for high earners) and to avoid a surprise in April.

Most Eastside tech employees are over-concentrated in their employer's stock and don't realize it until a quarterly earnings surprise takes 15% off. The fix isn't to sell everything — it's to pick a target percentage (10% of net worth is common) and rebalance back to it on a schedule.

Rule of thumb: if you wouldn't use a $100K cash bonus today to buy shares of your employer, you probably shouldn't be holding the RSUs you received last year either.

Practical implementation: on the day of each vest, sell enough to keep employer stock at your target percentage. Redirect the proceeds to a diversified portfolio. You'll miss the upside on a few outsized winners — and you'll avoid potentially significant downside on the majority that aren't.

If you have discretionary RSU sales (shares beyond what you auto-sell at vest), the question of when to sell is a tax question first and an investment question second.

Tactics:

• If you expect a lower-income year ahead (sabbatical, startup, part-time), defer the sale.
• If you have realized capital losses this year, harvest gains up to the loss amount.
• If you're doing charitable giving, donate appreciated shares directly — you skip the capital gains tax and get the full market-value deduction.
• If you're mega-bunching charitable giving into a donor-advised fund, do the contribution with appreciated stock, not cash.

Many high earners front-load their 401(k) in Q1 of their bonus year — which is fine if their plan offers a true-up, and a mistake if it doesn't.

Without a true-up, you miss the employer match on paychecks where you're no longer contributing. For a $200K base and 6% match, that can be $5–10K of lost match per year. Before you front-load, confirm your plan's behavior in writing. If it doesn't true up, smooth contributions across the year instead.

Within 72 hours of each RSU vest, run through:

• Tax reserve: is the withholding gap covered?
• Concentration: am I still at or below my target employer-stock percentage?
• Contributions: has anything changed in my 401(k)/HSA/mega backdoor plan?
• Bank balance: did the net-of-tax cash actually land, and is it in the right account?
• Intent: what is this vest going toward? (Savings? Home? Diversification?) Name it. Unnamed money tends to evaporate.

A 10-minute checklist, done four times a year, compounds into hundreds of thousands of dollars of better outcomes over a career. It's not glamorous. It's the whole ballgame.