Your RSUs Are Withheld at 22%. You're Not in the 22% Bracket.

The April surprise on an RSU-heavy return almost always has the same cause: your employer withheld federal tax on the vest at a flat rate that is lower than your actual marginal bracket. Nothing went wrong, exactly — the payroll system did what the rules allow. It just was not calibrated to a $400K+ household.

Multiply that by several vest dates a year and a rising stock price, and the gap compounds. The fix is not exotic — extra withholding on salary, sell-to-cover adjustments where the plan allows it, or quarterly estimates sized to the vest calendar. The work is doing the math before the vests, not after.

RSUs are the simplest instrument and still the most mismanaged, because the decisions hide in plain sight. Here is the sequence we run for RSU clients:

• Project the year from the vest calendar. Salary, bonus, every scheduled vest at a range of stock prices, both spouses. The projection drives everything else.
• Close the withholding gap on purpose. A specific dollar plan — additional payroll withholding, quarterly estimates, or both — sized to the safe harbor, so April is a non-event.
• Make sell-or-hold a deliberate decision. Vesting already created the income; holding afterward is an investment position in your employer. We quantify the tax side and coordinate the risk side with your advisor.
• Fix the basis before it costs you. Broker 1099-Bs routinely report RSU basis wrong, which silently double-taxes the vest income when shares are sold. We reconcile every sale against the vest records.

Options and purchase plans add decision points that RSUs do not have — and the decisions are yours, not payroll's, which is where planning earns its keep.

ISOs carry the biggest asymmetry. Exercise and hold long enough — generally more than two years from grant and one year from exercise — and the spread can convert to long-term capital gain. But the spread at exercise is an AMT adjustment, so a large single-year exercise can trigger a five- or six-figure AMT bill on stock you have not sold. We model exercise bands by year, weigh disqualifying dispositions when the stock has dropped, and track AMT credits so prior-year AMT comes back.

NSOs are ordinary income at exercise, which makes them a timing instrument: which year, at what spread, against what other income. ESPPs look small but compound — the discount is compensation, and whether a sale is a qualifying or disqualifying disposition changes how much of the gain is ordinary income versus capital gain. For private-company employees, we also plan around 83(b) elections, tender offers, and the liquidity trap of owing tax on shares you cannot yet sell.

For the conceptual deep-dive on each instrument, see our equity compensation strategy guide. This page is the service that puts it into practice.

Vest income is uneven by design: a big grant year, a cliff, an IPO window, a sabbatical. That lumpiness is a planning asset. The strategy is to push deductions into the high-income years and income recognition into the low ones.

In heavy vest years, that can mean bunching charitable gifts — often by giving appreciated shares instead of cash, which can avoid the capital gain and still capture the deduction — and maxing every pre-tax bucket available. In lighter years, it can mean ISO exercises, Roth conversions, or realizing gains at lower brackets. If your employer's 401(k) supports after-tax contributions, the mega backdoor Roth often fits RSU earners with strong cash flow; we cover the related conversion math in our Roth conversions guide.

Two adjacent strategies are worth knowing about: net unrealized appreciation treatment for employer stock held inside a 401(k) — see our NUA strategy guide — and the broader bracket, deduction, and entity work we do for high-income households. Equity comp planning rarely stands alone; it is usually the largest input into the whole-household plan.

Move from California to Texas with unvested RSUs and the grant does not move with you cleanly: most states, California prominently among them, tax equity compensation based on where you worked during the vesting period. A four-year grant earned half in California is typically half California-source income when it vests — even if you are a Texas resident by then. Payroll systems get this allocation wrong constantly, and the W-2 is what the state sees.

This is where Taxstra's multi-state depth pays off for tech employees. We allocate vest income across states correctly, fix the withholding coding with your employer where possible, and document the move so the position survives a lookback. If a relocation is part of your equity plan — before an IPO, for instance — sequencing matters enormously, and we plan it deliberately rather than discovering it on the return.

• A proactive planning firm, not a once-a-year preparer. Equity comp tax outcomes are decided at vest dates and exercise windows during the year. Our engagements are built around your equity calendar, with quantified recommendations before each trigger.
• Equity compensation for tech employees is a core specialty. RSU withholding gaps, ISO/AMT modeling, and ESPP dispositions are standing work here, alongside the rest of our high-income practice.
• Genuine multi-state expertise. Remote work, relocations, and cross-state vest sourcing are problems we solve every week — not edge cases we look up.
• Nationwide remote, roughly 1,500 clients. CPA-led by Bryan Martin, CPA, MBA, with clients in all 50 states — an established firm, not a side practice.
• Tech-forward operations. A modern client portal (TaxDome) handles document collection and deadlines, so a multi-vest, multi-account year stays organized.

We do not manage investments, which keeps the advice clean: no product to sell you, just the tax math. We coordinate directly with your financial advisor so the equity plan, the tax plan, and the portfolio agree with each other.