How to Deal with RSU’s

Many clients ask us: “have you dealt with RSUs before?”

We have, but before we dive any deeper into how we handle RSUs, let’s take a minute to discuss them.

RSUs, or Restricted Stock Units, are a way to compensate employees. It’s a method that’s used very frequently in the tech industry. An employee is given stock grants that vest on a set schedule. On the vesting date, they receive the right to the stock, at which time it is taxed and included in the employee’s compensation.

Sell to Cover: This usually is an option offered where a set amount of stock is sold to cover your estimated taxes on the stock vest.

The Biggest Concerns with RSU’s and the Sell to Cover Option

Most of the time the sell to cover option is a set ratio like 22% to 25%. However, the taxpayer’s tax rate might not be 22 to 25%. If they are highly compensated, their tax rate could be 28% to 32%, which would create a gap between what has been paid in and what is going to be owed at year end.

We recommend that you see if you can change your sell to cover option to be closer to your effective tax bracket. The other option is to increase your monthly withholding to lessen the amount you might owe.

TL;DR: We can help with an estimated tax plan to see if you are going to owe taxes from owning RSUs.

P.S. Want to learn how to manage your money better as a therapist? Now you can learn directly from Toni Cameron, CPA with our new on-demand webinars! Check out our most popular webinars here.
Khaled - TLDR

Khaled Albadawi, CPA

Principal & CEO

Khaled joined TL;DR as Principal in December of 2022, and has quickly hit the ground running offering a fresh new perspective for the TL;DR team and clients. He’s a natural entrepreneur & leader, starting his days at 4 AM with a nice cup of coffee to get a jumpstart on projects before the business world wakes up. His one piece of advice to business owners? Ask yourself if you are creating just another job or a business. Ideally, you should be building something that doesn’t require you to be there 40 hours a week!

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