Why RSUs create an estimated tax problem
Paycheck withholding is calibrated to your salary. RSUs add large, irregular chunks of wage income, and federal tax on them is usually withheld at a flat 22% (37% above $1 million of supplemental wages in a year). Once your taxable income is above $105,700 (single, 2026), the RSU income is taxed at 24% or more, so each vest can leave a shortfall.
How large depends on your bracket. In the 24% bracket, the federal shortfall is 2% of the vest. In the 32% bracket it's 10%, in the 35% bracket 13%. State withholding at vest can offset part of it: California (10.23%) and New York (11.70%) usually withhold more than most tech salaries owe. In other states it can add to the gap.
The IRS expects tax to be paid as income is earned, through withholding or estimated payments. If you fall short and don't meet a safe harbor, you owe an underpayment penalty on top of the tax.
How the underpayment penalty works
The penalty works like interest: the federal short-term rate plus 3 percentage points, reset every quarter. It's calculated separately for each quarterly installment, from that installment's due date until the tax is paid or April 15, whichever comes first.
By default, the IRS assumes your required payments are four equal installments of your annual tax, and treats withholding as paid evenly through the year, no matter when it was actually withheld. Estimated payments count on the date you make them.
That has two practical consequences. Extra paycheck withholding late in the year still counts as paid evenly, which makes it a powerful fix. And if most of your RSU income arrived late in the year, the annualized income installment method (Form 2210, Schedule AI) can reduce or remove the penalty for earlier quarters.
The 2026 estimated tax deadlines
The IRS year is split into four unequal periods. A vest's shortfall belongs to the period in which it vested.
| Period | Income earned | Payment due |
|---|---|---|
| Q1 | January 1 – March 31 | April 15, 2026 |
| Q2 | April 1 – May 31 (only 2 months) | June 15, 2026 |
| Q3 | June 1 – August 31 | September 15, 2026 |
| Q4 | September 1 – December 31 | January 15, 2027 |
If a deadline falls on a weekend or federal holiday, it moves to the next business day. The Q2 window catches people out: a vest in April or May needs a payment by June 15, not September.
Where to pay: federal payments are free through IRS Direct Pay (irs.gov/directpay) or your IRS online account. States have their own systems, for example California's FTB Web Pay. Federal and state payments are separate; paying one doesn't cover the other.
A worked example
Step 1: federal. The vest adds $8,080 of federal tax, because it falls in the 32% and 35% brackets. 22% was withheld ($5,500), so the federal shortfall is $2,580.
Step 2: state. California taxes this income at 9.3% ($2,325) and required 10.23% withholding ($2,557.50). California is over-withheld by $232.50, so no California payment is needed for this vest.
Step 3: FICA. Medicare ($362.50), Additional Medicare ($225) and California SDI ($325) were withheld exactly as owed. Social Security is already capped at this salary.
Step 4: pay. A May vest falls in Q2, so pay $2,580 to the IRS by June 15, 2026. Alternatively, add the amount to your paycheck withholding for the rest of the year with a new W-4.
The overall gap is about −$2,350, because the California over-withholding partly offsets the federal shortfall on your final return. For the estimated payment, it's safest to cover the federal shortfall in full, since federal and state payments are separate.
Safe harbor: avoid the penalty even if you owe
You owe no underpayment penalty if your withholding plus timely estimated payments covered at least the smaller of:
- 90% of this year's total tax, or
- 100% of last year's total tax, or 110% if last year's adjusted gross income was over $150,000 ($75,000 if married filing separately).
The prior-year rule is useful when RSU income is hard to predict: last year's tax is a known number. If your withholding already covers 110% of it, you're protected from the penalty even if this year's tax is much higher. You still owe the remaining tax when you file.
No penalty applies either if you owe less than $1,000 after withholding and credits.