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RSU vesting: a paycheck survival guide for tech workers

12 min read · published 2026-05-05 · updated 2026-05-05

Restricted Stock Unit vesting events are paychecks in disguise. Here is what shows up on the stub, how withholding actually works, why "sell-to-cover" can leave a tax shortfall, and what to do before the next vest.

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How an RSU vest shows on a paycheck

On vest day, the fair market value (FMV) of the vested shares is added to that period's wages. Your stub will typically show a line like "RSU income" or "Stock vest" for the FMV, plus matching tax lines (federal supplemental, Medicare, sometimes state). The shares themselves are deposited to your brokerage account, often after sell-to-cover.

Sell-to-cover, explained

To pay the IRS the supplemental withholding on the vest, your employer instructs the broker to sell enough vested shares to raise the cash. With a 22% federal supplemental rate plus FICA plus state, that is often 30-40% of the vest sold immediately. The remaining shares land in your account.

Why sell-to-cover often under-withholds

The default 22% federal supplemental rate assumes the recipient is in or near the 22% bracket. Many tech workers with substantial RSUs are in the 32% or 35% bracket. The 10-13 percentage point gap shows up at filing as a balance due. The Additional Medicare Tax (0.9% over $200k) compounds this for high earners.

Three ways to close the gap

W-4 Step 4(c) extra withholding from each regular paycheck.
Quarterly estimated payments (Form 1040-ES) timed around vest dates.
Voluntary "supplemental withholding" elections offered by some employers — often available in the equity portal.

The Section 83(b) edge case

83(b) elections do not apply to standard RSUs (which are not "transferred" until vest); they apply to restricted stock awards. If you have RSAs not RSUs and your equity award allows an 83(b), the deadline is 30 days from grant. Talk to a CPA — this is a one-shot decision.

Cost basis traps when you eventually sell

Your cost basis in vested shares equals the FMV at vest (which was already taxed as ordinary income). If your broker reports cost basis as $0, you will be taxed twice unless you correct it on Form 8949. Always keep the vest confirmation and verify the 1099-B basis number against your equity portal.

What PayslipIQ can flag

When you enter a vest period in the Pay Stub Checker, PayslipIQ compares the supplemental withholding to a 22% baseline and notes if YTD wages have crossed the $200k Additional Medicare threshold. It cannot file your taxes — that is the role of a CPA or tax software.