RSU Vests Withheld at 22% Can Leave High Earners $25,000 Short at Tax Time

The IRS marked National Payroll Week, September 7 to 11, with a September 4, 2026 reminder urging workers to check their withholding after major income changes. For employees whose pay arrives partly in restricted stock units, that checkup often reveals a gap, because employers generally withhold on stock vests at a flat rate that sits well below the brackets many of those employees occupy.

What the IRS said

The release, IR-2026-105, encourages employees to review withholding after events such as starting or leaving a job, holding more than one job, marriage or divorce, a birth or adoption, or a significant change in income. It points workers to the free Tax Withholding Estimator, which uses pay statements and expected income, deductions and credits to show whether withholding is on track, and to an updated Form W-4 submitted to the employer rather than to the IRS.

Why RSU holders fall short

When restricted stock vests, the value of the shares is wages. Employers typically treat it as supplemental pay. Under IRS Publication 15 for 2026, federal income tax on supplemental wages can be withheld at a flat 22%, and the rate becomes a mandatory 37% on supplemental wages above $1 million paid to an employee during the calendar year. The 22% rate does not change with income. An employee whose salary alone places them in the 32% or 35% bracket gets the same withholding on a vest as a colleague in the 22% bracket.

A second effect can mask the problem. Social Security tax stops once wages reach the 2026 wage base of $184,500, so take-home pay often rises late in the year, even while income tax on vests remains underwithheld.

The after-tax math

Example, using the IRS's 2026 brackets for single filers and round numbers: an engineer earns a $250,000 salary and receives $200,000 of RSUs that vest during the year. After the $16,100 standard deduction, taxable income is about $433,900, and the vesting income stretches from roughly $233,900 to $433,900. For single filers, the 32% bracket runs to $256,225 and the 35% bracket to $640,600.

The calculation assumes withholding on salary is accurate and leaves out state income tax, the additional Medicare tax and any later sale of the shares. The point is the structure: the higher an employee's other income, the wider the gap between 22% and the actual marginal rate. An employee with larger grants, or a spouse with high wages on a joint return, can see a considerably bigger gap.

Ways households address the gap

• Form W-4 adjustments. An employee can request extra federal withholding from each regular paycheck, spreading the catch-up across the remaining pay periods of the year.
• Estimated tax payments. Quarterly estimates can cover the difference without changing payroll, which suits employees whose vest schedule is lumpy.
• Safe harbor planning. The IRS generally does not charge the underpayment penalty when withholding and estimates cover 90% of the current year's tax or 100% of the prior year's tax, rising to 110% when prior-year adjusted gross income exceeded $150,000. For an employee whose income jumped this year, the prior-year test can be the easier target.

Which route fits depends on how many vests remain, whether shares will be sold, and how large the prior year's tax bill was, points worth running through with a CPA.

What to watch

Employers are also preparing for 2026 Form W-2 changes, one of the topics in the IRS's September 8 payroll webinar. For employees with large vests still ahead this year, a projection with the withholding estimator before the fourth-quarter vest dates can show how much of the gap remains while there is still time to spread the catch-up.

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