4 ms·

> No tax is withheld at vest time. At least in the majority of cases/usually. My last two employers deducted shares at vest as tax. This is in US, btw. I am s

> No tax is withheld at vest time. At least in the majority of cases/usually. My last two employers deducted shares at vest as tax. This is in US, btw. I am surprised it isn't the common practice. The only problem was that the withholding rate was too low for my effective tax rate which means I always have to pay estimated taxes.

kevinventullo 4y ago
Google and Facebook both deduct shares at vest. The default is something like 25%, which isn’t too far off from most folks’ effective tax rates. Yet, base comp tends to be withheld at marginal rates; so if you don’t change anything, you can still end up owing a decent amount.
- junar 4y ago
  > The default is something like 25% Default withholding has been 22% now for a few years. I bring this up because the gap between default withholding and the higher marginal rates has widened compared to the years it was at 25%. > Yet, base comp tends to be withheld at marginal rates To clarify, default withholding on base pay uses your bottom tax rates. It assumes you have no other income, so it will calculate based on standard deduction, 10%, 12%, then working upwards. So I wouldn't use the word "marginal" to refer to base pay because most people understand that as their top tax rates. This means that for bonus, stock, and other compensation, it's reasonable to increase withholding to reflect the top tax rates. > most folks’ effective tax rates A bit of an aside, but I'm not a big fan of the idea of "effective tax rates". It's not a term the IRS uses, but something that tax software companies like to push for whatever reason. You also can't do much with it in practice: regarding withholding, it's not useful and potentially confusing.
  - kevinventullo 4y ago
    Thank you for the correction, and yes I agree with everything you wrote!

4 ms·

> No tax is withheld at vest time. At least in the majority of cases/usually. My last two employers deducted shares at vest as tax. This is in US, btw. I am s

by nsenifty 4y ago

kevinventullo 4y ago
Google and Facebook both deduct shares at vest. The default is something like 25%, which isn’t too far off from most folks’ effective tax rates. Yet, base comp tends to be withheld at marginal rates; so if you don’t change anything, you can still end up owing a decent amount.
- junar 4y ago
  > The default is something like 25% Default withholding has been 22% now for a few years. I bring this up because the gap between default withholding and the higher marginal rates has widened compared to the years it was at 25%. > Yet, base comp tends to be withheld at marginal rates To clarify, default withholding on base pay uses your bottom tax rates. It assumes you have no other income, so it will calculate based on standard deduction, 10%, 12%, then working upwards. So I wouldn't use the word "marginal" to refer to base pay because most people understand that as their top tax rates. This means that for bonus, stock, and other compensation, it's reasonable to increase withholding to reflect the top tax rates. > most folks’ effective tax rates A bit of an aside, but I'm not a big fan of the idea of "effective tax rates". It's not a term the IRS uses, but something that tax software companies like to push for whatever reason. You also can't do much with it in practice: regarding withholding, it's not useful and potentially confusing.
  - kevinventullo 4y ago
    Thank you for the correction, and yes I agree with everything you wrote!