Taxes

Many tech employees misunderstand the tax treatment of RSUs, leading to unexpected bills and avoidable penalties. Here are the core points from the lesson:

• When RSUs vest, their value is taxed immediately as ordinary income—similar to receiving a cash bonus
• Default federal withholding on RSUs is typically 22%, which is often too low for high earners, potentially resulting in underpayment penalties
• To avoid penalties, aim to meet the IRS Safe Harbor rule—usually by paying 110% of last year’s tax liability if your income exceeds $150k

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