Your RSUs Vested, You Sold Nothing, and Now You Owe $14,000 in April

Reconstruct the $14,000 before choosing how to pay it

The tax import finishes, the W-2 loads and the number in the corner turns red: five figures due. You saw shares removed at vest and the broker confirmed withholding, so a software error feels plausible. Some tax was withheld. The flat method may simply have withheld too little.

The rest of the money has already become a wedding, a car and eleven months of ordinary life. Meanwhile, the shares you kept trade below their vest-date price. Treat the tax bill and that later price decline as separate calculations.

Check every rate for the tax year you are filing, because rates and thresholds move. For 2026, IRS Publication 15 says separately identified supplemental wages may be withheld at a flat 22% when the employee has had regular income-tax withholding. Supplemental wages above $1,000,000 in the calendar year are withheld at 37%; an employer may instead use the aggregate method with regular wages. The flat 22% method is common, and it is the scenario that produces this article (IRS Publication 15, section 7).

That 22% is a withholding rule, not an estimate of your final marginal rate. It is the same flat percentage for a worker earning $70,000 and one earning $400,000. A substantial RSU vest added to a substantial salary can land partly in a higher bracket, creating the shortfall on vest day even when payroll applied its method correctly. Your company is not responsible for explaining the gap.

Pull the vest statement and size the federal gap

RSUs are ordinary income when they vest. Find the pay statement for the vest date; the amount is already included in box 1 of the W-2. For a planning estimate, subtract 22% from your marginal federal rate and multiply the difference by vest income.

Suppose 2,000 shares vested at $55. The ordinary income is $110,000, and 22% withholding is $24,200. If the top of that income falls in a 35% bracket, tax attributable to it is roughly $38,500 and the estimated gap is about $14,300. The actual return will differ because not all $110,000 necessarily sits in one bracket and the rest of the return changes the result.

Now check the state return. Many states use a flat supplemental rate below a taxpayer's eventual state rate, producing a second, smaller gap.

Also check Additional Medicare Tax: 0.9% applies to wages above $200,000 for a single filer and $250,000 for married filing jointly. An employer begins withholding after it pays one employee more than $200,000, regardless of the employee's joint filing threshold. A married couple or someone who changed jobs mid-year can therefore see an amount due on the return.

Finally, estimate any underpayment penalty. IRS Publication 505 gives the general required annual payment as the smaller of 90% of the current year's expected tax or 100% of the prior year's tax; the prior-year percentage becomes 110% when prior-year adjusted gross income exceeded $150,000, or $75,000 for married filing separately (IRS Publication 505). Withholding is generally treated as paid evenly through the year, while an estimated payment counts when made. Discovering the shortfall in November means extra payroll withholding during the final two months can repair a February underpayment in a way a November estimated-tax cheque cannot.

Separate four common suggestions from what they actually do

Changing Form W-4 does not change the 22% flat supplemental rate; the form controls withholding on regular wages. Line 4(c) can add a fixed amount to regular-pay withholding, but it spreads a lumpy vest problem across every paycheque, including quarters with no vest.

A filing extension can provide six more months to file, not six more months to pay. Interest and the failure-to-pay penalty begin at the original deadline. The IRS says a taxpayer who filed on time but did not pay faces interest plus a failure-to-pay penalty of one-half of one percent per month or part of a month, up to 25% (IRS).

Selling shares now can raise cash, but a sale below the vest price does not reduce the ordinary income recognised on the vest date. Vest-day value is the cost basis; a lower sale creates a capital loss. Capital losses offset capital gains first and then up to $3,000 of ordinary income each year, with the remainder carried forward.

Loss harvesting also needs the acquisition calendar. With quarterly vests, selling at a loss when another block arrives within thirty days before or after can invoke the wash-sale rule because the vest acquires the same stock. Have a tax preparer check the dates.

Choose the least expensive way to produce cash

If you still own the shares, selling is usually the cheapest route. The employer already supplies your salary and health insurance, so retained shares create a concentrated position almost nobody would deliberately build with cash. Near the vest price, selling costs little beyond shedding concentration you probably did not want. Far below it, selling still does not repair April's tax calculation, although reducing concentration may remain sensible.

Cash is next, and an emergency fund exists exactly for this bill. Check whether paying in full would empty it.

When neither source covers the balance, compare the IRS plans against the real cost of borrowing elsewhere. A short-term plan can run for up to 180 days and has no setup fee. A long-term installment agreement carries a setup fee, reduced for direct debit and potentially waived for low-income taxpayers. The ordinary failure-to-pay penalty is 0.5% of unpaid tax per month; when a return was filed on time and an approved installment agreement is in effect, the rate falls to 0.25% (IRS collection FAQ). The reduction belongs to the approved long-term installment agreement; a short-term plan does not halve the penalty. Interest is set quarterly and compounds daily; look up the current quarter instead of relying on a remembered rate.

A federal tax payment by credit card usually loses the comparison because the processor charges a percentage fee before card interest begins. A 401(k) loan has a different hazard: leaving or losing the job can accelerate repayment.

Use a CPA or enrolled agent for filing when there are multiple states, a move during the year or equity beyond plain RSUs. The available mistakes are large compared with the professional fee. Money Planning Frank is TrueTalk's AI persona for financial planning and investing; while you wait for an appointment, it can help lay out the arithmetic, but it does not replace tax advice.

Put the next vest on a payment calendar

Ask payroll in writing whether its provider permits supplemental withholding above 22%. Some do and many do not, so obtain the answer before the next vest.

If payroll cannot change it, make an estimated payment in the quarter the vest occurs through Form 1040-ES or the IRS online payment system, sized to the calculated gap. Use W-4 line 4(c) when regular-pay withholding is the workable, blunter option.

Default to selling shares as they vest. Executive holding requirements override that choice. If blackout windows restrict trading, ask in advance about a trading plan rather than improvising each quarter. Tax is due whether you sell or hold, which makes holding an active decision to keep buying employer stock with money that was briefly yours.

Put the next vest date in the calendar today and set a reminder two weeks before it. At that reminder, confirm payroll's method, update the year's thresholds, calculate the expected gap and arrange the payment. The work in this article became necessary because last year's calendar did not contain that two-week reminder.