RSU Tax Guide · Quarterly action
Sell-to-cover does not cover your tax bill
Most companies use "sell-to-cover" (also called net settlement): at vest they automatically sell a slice of your shares and send the proceeds to the IRS. It looks like the tax is handled. It isn't — and assuming it is causes the April surprise.
What sell-to-cover actually does
Sell-to-cover remits the mandatory flat withholding: 22% federal (37% over $1M) plus your state's supplemental rate. That's it. If your real marginal rate is 32–37%, the difference between what was withheld and what you owe is still your responsibility. The calculator shows the shares sold, the shares you keep, and the exact amount you still owe after the sale.
Close the gap with quarterly estimates
Paying the whole shortfall next April isn't enough — the IRS expects it spread across quarters and charges an underpayment penalty (Form 2210) if you're short. To stay safe, your total payments need to hit one of two safe harbors:
- 90% of your current-year tax, or
- 100% of last year's tax (110% if your prior-year AGI was over $150,000),
whichever is smaller. The calculator computes the additional amount to pay and splits it across the remaining quarterly deadlines, with a link to IRS Direct Pay.
FAQ
Does sell-to-cover pay all my RSU tax?
No. Sell-to-cover sells just enough shares to remit the flat 22% federal (plus any state) withholding. Your true tax at a 32–37% marginal rate is higher, so a gap remains that you must pay at filing or via estimated taxes.
When are quarterly estimated taxes due?
For 2026: April 15, June 15, September 15, and the following January 15. Pay the gap by the deadline for the quarter in which you vested to minimize the underpayment penalty.
What is the safe harbor?
You avoid the Form 2210 penalty if your total payments (withholding + estimates) reach 90% of this year’s tax, or 100% of last year’s tax (110% if prior-year AGI exceeded $150,000) — whichever is smaller.