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Comment by manacit | Hacker News Reader

This is dangerous advice, and I wouldn't recommend that anyone assume that everything is 'just handled' when it involves taxes and anything more complex than regular salary.

RSUs, bonuses, etc. will likely be withheld at the IRS supplemental rate of 22% (37% once employees receive >$1mm of it in a year), whereas your marginal rate could easily reach above that depending on how much equity and bonus compensation you're getting.

In your first windfall year, the IRS has rules that will prevent people from being hit with overwitholding penalties. After that, if you don't pay at least 90% of your calculated end of year taxes, you're going to see a penalty.

My advice to _anyone_ starting off is to just talk to a professional when equity and bonuses are involved. It is going to cost you money, but it is going to save you money in the long run.

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I don't understand the situation you are concerned about where you don't end up paying the minimum of 90% of your current year's tax or 110% of the previous year's tax (these are the numbers to avoid a penalty).

Can you explain this situation?

As I see it, even in the wild case where your company's stock explodes, if your brokerage is "selling to cover", you will more than hit 110% of your previous year's tax bill (since you are paying 22% tax on those shares). Yes, you will get a whopper of a tax bill, but you won't pay penalties on it.

Btw, I don't know why you quoted "just handled" when I didn't use those words. I wanted people to recognize what "sell to cover" means, since usually when you start with a company you have to create a brokerage account and they will ask how you want your taxes handled.

If you're vesting enough equity, your brokerage is only holding on to 22% and you don't have enough of your salary withheld, it's very possible to end up with a marginal rate that is in the high 20s or low 30s, and not enough tax paid.

This can happen without triggering the 110% of previous year portion if you're regularly vesting a lot of equity - the more you vest, the farther 22% is going to be from your actual marginal tax rate.

I used single quotes instead of double quotes around "just handled" to quote the idea and summary of what you were saying - that it would be handled automatically by the brokerage - and not as a direct quote

Google let's you choose supplemental withholding rate. This isn't an issue anymore.

The other option is to pay 110% of your prior year taxes. As long as you're on track to do that, then you also don't get hit with penalties.

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