Our Services
Equity Compensation
Most of your compensation probably is not your salary. Equity is taxed differently from a paycheck, withheld differently from a paycheck, and — if part of your vesting period happened in another country — sourced differently too. We handle all three.
What We Cover
The equity questions technology employees actually run into, including the cross-border ones.
Where the gap comes from
A vest goes through, the tax looks handled, and the return says you owe $26,000. Nothing malfunctioned to produce that. A short sequence of things happens, each working exactly as designed, and the gap is what falls out of the end of it.
Your vest is withheld at a flat rate
Equity vesting is treated as supplemental wages, and supplemental wages are generally withheld at a single flat rate rather than at a rate computed from your circumstances. That rate is one broad approximation — it does not know your salary, your spouse's income, or anything else that will appear on your return. Some employers use a different method, and above a certain level of supplemental wages in a year a higher mandatory rate takes over, so it is worth checking what your own payslip actually did rather than assuming.
Your marginal rate is set by your whole return
Salary, the vest itself, a spouse's income, interest, everything. For most technology compensation the marginal rate lands well above the flat withholding rate, which means the withholding was never going to be enough — not because anything went wrong, but because it is an approximation and you are above it.
Nobody remits the difference
Your employer withheld exactly what it was required to withhold, and the IRS received exactly that. The difference between what was withheld and what you owe is not held anywhere on your behalf. It simply becomes a balance due when you file.
The gap widens as your income rises
It is the distance between a fixed rate and a rising one, so it grows with everything you earn. A second vest in the same year does not double the problem — it produces a larger one, because it stacks on the first and is taxed higher still.
A penalty can apply even if you pay in full and on time
Tax is owed as income is earned, not only when you file. Paying the entire balance in April can still leave an underpayment penalty, because the payments were late even though the return was not. Withholding extra through the year or making quarterly estimates both solve it — before the vest, not after.
Common Questions
My employer withheld taxes on my RSUs. Why do I still owe?
Withholding on a vest uses a flat supplemental rate, not your marginal rate. If your marginal rate is higher than that flat rate — and for most technology salaries it is — the difference is not withheld by anyone. It becomes a balance due at filing, and can trigger underpayment penalties on top.
Part of my RSU vesting period happened before I moved to the United States. Is all of it U.S. income?
Not necessarily. Equity income is generally sourced over the period of service that earned it, so grants that began vesting while you worked abroad may be partly foreign-source. That sourcing affects both what the U.S. taxes and what foreign tax credit you can claim. It is frequently handled incorrectly, in both directions.
What happens to my unvested shares if I leave the country?
That depends on your plan documents, your residency status when the shares eventually vest, and any applicable treaty. The planning matters most in the year you change status, so it is worth reviewing before you go rather than after.
I exercised ISOs and my accountant mentioned AMT. What does that mean?
Exercising an incentive stock option without selling creates no regular taxable income, but the spread between the strike price and the fair market value is an adjustment for alternative minimum tax. You can owe real cash tax on shares you have not sold and cannot necessarily sell. Timing the exercise deliberately is the whole game.
My equity is in a private company. Should I exercise before there is any way to sell?
Sometimes, and the calculation is genuinely difficult. Exercising early can start a holding-period clock and lock in a lower spread while the 409A valuation is low, which may reduce tax later. It also means paying real money — and possibly alternative minimum tax — for shares you cannot sell, in a company that may never provide a way to sell them. There is a further wrinkle if leaving that employer may not be entirely your choice — because your visa is tied to the job, for instance. The plan documents, not your status, are what set the deadline: they typically give you a short window after you leave to exercise or forfeit, and that window does not care whether a liquidity event is close. It is worth modelling before you are under time pressure.
Plan the tax before the vest
Bring us your vest schedule and grant documents. We will tell you what you will owe and when, before April tells you.
Schedule ConsultationThis page is not immigration advice
We are tax accountants, not immigration attorneys. Where this page mentions a visa or residency status, it is explaining how that status affects a tax question — not assessing your work authorization, your eligibility, or what any of it means for an application. Those consequences are more serious than tax ones and depend on facts we do not evaluate. Please speak with a licensed immigration attorney before acting on anything that touches your status, and bring us in once you know where you stand.