I’m not sure I understand the RSU one. I just went back and did the math on my RSUs from last year and my company deducted over 22% on federal, as well as taxes for social security, Medicare, and state tax.
Assuming there isn’t a 2nd income drastically raising your income, why wouldn’t the company withhold the right percentage, considering they know what you make? Choosing a flat 22% seems odd.
blinded•1h ago
From what I've seen in Schwab and experienced personally. The "sell shares for taxes" settings is a flat tax rate, mine is 26% last I looked. If you're in the higher brackets[1], ie making 250k+ it can be up to 9% difference. So if you get a vest of 20k in November toward the end of the year where you're likely in that higher bracket the amount Schwab sells could be 1,200~ difference (assuming 32% tax bracket, 26% flat), meaning you'd owe the federal gov that come tax time.
If you speak with a tax professional, for which I am not, they would tell you to calculate the difference and pay quarterly amounts. In practice this means that I sell more periodically just for taxes[2].
Edit: from what I understand payroll isn't informing Schwab of your current bracket, nor do I think they should have to.
al_borland•57m ago
Interesting. I get pay statement adjustments (they show up alongside my paychecks when I view them) to take out the taxes, so it seems like my employer is doing it, not the brokerage. I’m not sure if they do this when the RSU’s are first given, or when they vest; I’ll have to pay more attention this year.
I do need to do something weird with my taxes every year to enter that the taxes were already paid, as by default when I import, it shows that I need to pay taxes on the whole thing. Every year it feels like doing it for the first time; it’s always confusing to find the right spot in TurboTax and which numbers to enter for the taxes I already paid.
If the brokerage is doing the deduction based on a checkbox the user selects, I can see how a discrepancy could arise.
al_borland•2h ago
Assuming there isn’t a 2nd income drastically raising your income, why wouldn’t the company withhold the right percentage, considering they know what you make? Choosing a flat 22% seems odd.
blinded•1h ago
If you speak with a tax professional, for which I am not, they would tell you to calculate the difference and pay quarterly amounts. In practice this means that I sell more periodically just for taxes[2].
1. https://www.irs.gov/filing/federal-income-tax-rates-and-brac... 2. https://www.irs.gov/businesses/small-businesses-self-employe...
Edit: from what I understand payroll isn't informing Schwab of your current bracket, nor do I think they should have to.
al_borland•57m ago
I do need to do something weird with my taxes every year to enter that the taxes were already paid, as by default when I import, it shows that I need to pay taxes on the whole thing. Every year it feels like doing it for the first time; it’s always confusing to find the right spot in TurboTax and which numbers to enter for the taxes I already paid.
If the brokerage is doing the deduction based on a checkbox the user selects, I can see how a discrepancy could arise.