Your company stock vested, but you might be sitting on a tax timebomb.

Sure, your company withheld shares to cover the taxes, and the remaining stock showed up in your brokerage account.

So, why are you still facing a five-figure tax bill when April comes around?

Well, here’s the thing: Just because your employer withheld taxes on your restricted stock units (RSUs)  doesn’t mean they withheld enough.

And for tech professionals who receive a large share of their pay in company stock, the difference can be significant.

Now, the problem isn’t necessarily that your employer made a mistake.

It’s that the withholding rules your employer follows may have little to do with your actual tax bill. And unless you’re watching that gap throughout the year, you could be setting yourself up for an unpleasant surprise when you file.

Why RSU Withholding Can Leave You Owing Thousands

How so?

Well, when your RSUs vest, their fair market value is treated as ordinary compensation income.

So then, if 1,000 shares vest while your company’s stock trades at $200, you’ve received $200,000 in taxable compensation. That income stacks on top of your salary, your bonus, and everything else you earn that year.

And that’s where the problem begins.

Under IRS Publication 15, employers can withhold federal income tax on supplemental wages, including RSU income, at a flat 22% if certain conditions are met. To be sure, employers can use other permitted methods. And once your supplemental wages pass $1 million in a calendar year, the excess must be withheld at 37%.

But for many tech professionals, the flat 22% is where the trouble starts, because 22% is a withholding rate, not your tax rate.

If you’re a single filer earning $300,000 or more between salary, bonus, and vested stock, a meaningful portion of that pay can land in the 32% or 35% federal bracket. Married couples filing jointly reach those brackets at roughly twice the income.

Either way, your employer could be withholding far less than you’ll ultimately owe.

I covered how equity awards become taxable here: What Are Restricted Stock Units (RSUs)?.

But there’s another wrinkle worth understanding here because when your employer withholds shares to cover taxes, it can look as though the obligation has been settled.

You don’t get an invoice.

You don’t write a check.

And your regular take-home pay doesn’t change.

So, the shortfall doesn’t show up in your stock compensation portal. It shows up when your tax return compares what you owe against what you’ve already paid, and by then, the year is over.

How $200,000 in RSUs Can Leave You $25,000 Short

Consider, for example, a hypothetical product manager at a publicly traded tech company we’ll call Mary. She earns a $250,000 salary and has another $200,000 in RSUs vesting throughout 2026, bringing her total compensation to $450,000.

Each time Mary’s shares vest, her company withholds federal income tax at 22%. Across the year, that’s $44,000 withheld against $200,000 of vested stock.

So far, everything seems straightforward.

But watch what happens when we calculate what she actually owes.

Assume Mary’s single, takes the standard deduction, and has no other income, adjustments, or credits. Under the 2026 federal income tax brackets, her salary alone already puts her in the 32% bracket. Add $200,000 of RSUs, and a slice of that stock income is taxed at 32%, with the rest taxed at 35%.

All told, the additional federal income tax on her RSUs comes to about $69,330.

But, her employer withheld $44,000.

That’s a potential withholding shortfall of $25,330.

And that’s federal income tax alone.

It leaves out state income taxes, payroll taxes, and anything else that could change her final bill.

Now, that doesn’t mean she’ll owe another $25,000 when she files. Withholding on her salary, estimated payments, or other parts of her tax picture could offset some or all of it.

But that’s precisely the problem.

Until someone reconciles her total income, her projected tax, and what she’s already paid, there’s no way to know whether she’s on track.

So, the most important question isn’t whether taxes were withheld when your RSUs vested.

It’s whether the taxes you’re paying throughout the year are keeping pace with the income you’re actually earning.

Is Your Tax Payment Schedule Holding Up?

Answering that question starts with how you’re actually paid, not with a tax rate applied to your salary.

The trouble is, that information rarely sits in one place. Your pay stub shows your salary and year-to-date withholding. Your stock plan portal shows grants, vesting dates, and shares withheld for taxes. Your brokerage statements show what you’ve sold. And your W-2 doesn’t bring it all together until the year is over. Viewed on its own, none of those records tells you whether you’ve paid enough.

So, what do you do?

Well, start by rebuilding the year: base salary, expected bonus, stock awards, and when each vest is scheduled. That last piece matters more than many people realize.

Suppose your RSUs vest quarterly.

In January, your company’s stock trades at $150. By the third quarter, it’s at $200. The number of shares vesting hasn’t changed, but the income you’re recognizing has, and so has your tax bill.

That’s why the value of your awards in January can’t stand in for the full year. As each vest approaches and the stock price moves, the projection needs to move with it, keeping what you’ve already received separate from what you still expect before December 31.

One caution here.

RSU income shows up in the wages on your pay stub and W-2. If you add your vested share value on top of year-to-date wages without checking what’s already included, you’ll count the same income twice and throw off the projection before you’ve even looked at the withholding gap.

I’ve written about understanding your grants and vesting schedule in Stock-Based Compensation: 3 Basics to Focus on This Year. When it comes to withholding, though, your vesting schedule is more than a record of when shares become yours. It’s a schedule of taxable income.

And it has to be read alongside everything else you earn. Your filing status, deductions, investment income, and state taxes all shape what you owe.

Suppose you receive a large bonus in March, followed by several vests over the summer and fall.

Look only at the RSUs, and you’ll underestimate what you owe, because the bonus has already pushed your income higher. On the other hand, if your bonus comes in smaller or your stock falls before it vests, the extra withholding you planned might no longer be needed.

The goal is to project what you’ll owe, compare it against what you’ve already paid, and adjust before the year ends.

Withholding more is only one way to get there. And because the assumptions behind your projection will keep changing, the projection should keep changing too.

Should You Increase Withholding or Make an Estimated Payment?

Think back to our product manager, Mary. Suppose she reviews her numbers in September and finds a projected $25,000 federal shortfall tied to her RSUs.

Now Mary has a decision to make.

Should she raise the withholding on her remaining paychecks?

Should she make an estimated tax payment?

Or has she already paid enough to avoid an underpayment penalty, even if she’ll still owe a balance when she files?

These aren’t the same decision.

Under IRS Publication 505, you can generally avoid an underpayment penalty by paying at least the smaller of 90% of this year’s tax or 100% of last year’s.

If last year’s adjusted gross income was more than $150,000, or $75,000 if married filing separately, that prior-year figure rises to 110%.

But avoiding a penalty isn’t the same as eliminating your tax bill. You could meet those thresholds and still owe a substantial amount in April.

Timing matters too, and this is where withholding has a real advantage. Federal income tax withheld from your paychecks is treated as if it were paid evenly throughout the year, unless you choose to use the actual dates it was withheld. Estimated payments, on the other hand, count only when you make them.

What this means is that a large estimated payment in December won’t fix an underpayment that started in the spring. Raising the withholding on your fall paychecks can, because that tax is treated as if it had been paid all year long. And if your income arrived unevenly, the annualized income installment method described in Publication 505 may also help.

This matters most when a large vest early in the year goes unnoticed until fall. If you still have paychecks left before December 31, adjusting your withholding may accomplish what an estimated payment can’t.

Either way, the decision should follow your tax projection, not a generic withholding percentage.

Don’t Confuse RSU Withholding With Taxes on Stock Sales

There’s one more issue to keep separate from the withholding problem.

Once your RSUs vest, the shares become investments you own. If you keep holding them, any change in value creates its own tax consequence when you sell. Shares that vest at $200 and later sell for $250 produce a $50-per-share capital gain, which is separate from the ordinary income you recognized at vesting. I’ve discussed this distinction in Are RSUs Taxed Twice?.

Why bring this up in a discussion about withholding? Because if you’re selling shares to raise cash for taxes, those sales can create gains or losses of their own.

And the cost basis on your return has to reflect the compensation income you already recognized at vesting.

Otherwise, you could end up creating a second tax reporting problem while trying to solve the first.

That’s why equity compensation planning means looking past individual tax documents to how the transactions fit together.

The Bottom Line: Treat Every RSU Vest as a Tax Event

Your employer withholding taxes on your RSUs is only part of the picture. What matters is whether those payments are enough once they’re combined with the rest of your income and taxes for the year.

And for technology professionals earning much of their pay in company stock, that question deserves attention well before tax season.

So start with your vesting schedule and estimate how much stock compensation you’re likely to receive before year-end.

Compare the federal and state taxes being withheld against your projected tax bill. Then decide whether you need more payroll withholding or an estimated payment, and whether the timing of those payments matters.

Most importantly, revisit those numbers as your actual compensation becomes clearer.

Because a tax return tells you what happened.

A tax projection gives you the opportunity to do something about it before the year is over.

At Franklin Madison Private Wealth, we start by understanding how you’re compensated, so we can identify potential tax issues before they become surprises.

If you’re a technology professional receiving RSUs, bonuses, or other forms of equity compensation, learn more about our tax preparation and planning services.

Related Reading

What Are Restricted Stock Units (RSUs)?

Are RSUs Taxed Twice?

Stock-Based Compensation: 3 Basics to Focus on This Year

Sources

Internal Revenue Service, “Publication 15 (2026), Employer’s Tax Guide.”
https://www.irs.gov/publications/p15

Internal Revenue Service, “Revenue Procedure 2025-32, 2026 Inflation Adjustments.”
https://www.irs.gov/irb/2025-45_IRB

Internal Revenue Service, “Publication 505 (2026), Tax Withholding and Estimated Tax.”
https://www.irs.gov/publications/p505