Why do I owe money?
Hi all you big TC earners (or people that just understand tax), I need some advice/understanding as to why I owe money on my tax returns these past two years for federal income (I only recently started earning RSU income). My gross pay was around 386k this year with ~86k federal tax withheld and ~33k state income tax withheld. I max out my 401k , and for my RSU withholding I set it to 11% for state and 35% for federal. When my RSUs vest, more than half of them get withheld for taxes (157 withheld vs 137 kept) which makes me think I’m getting way over taxed on them? But when I put all my info into TurboTax it says I owe around 7.5k in federal taxes and will get back around 2.8k in state income taxes. I would have expected that because I am paying so much In taxes for RSUs I would have gotten money back. I have the standard single guy withholding set by Apple (if that matters), also live in California. Am I doing something wrong? Should I get my numbers checked by a CPA? Or is this normal? TC: explained above
You can find the tax brackets for state tax and do a back of paper calculation for that as well
Insufficient information
401m is Roth or no? If Roth then 20k don't count to taxes.
Traditional 401k
Did you put zero allowance for w4? By 180k any allowance set would result in insufficient withholding.
It's very simple: you're probably not withholding enough money for your RSUs. The default RSU withholding is around 18% I think, which is way too low.
It’s actually 22% and I bumped mine up to 35% for federal and 11% (up from default 10.23%) which is why I’m confused as to why I’m not withholding enough
You need to manually enter in the cost basis bro.
Isn’t that only for RSUs that you sell after vesting? Do I have to put in cost basis for RSUs even when E*trade sells on vest for me?
I manually entered the cost basis for the few shares that I did sell post vest on my 1099 (and they were actually at a loss) and I got a couple hundred back on my state return.
Some brokerages will provide a non reported supplement 1099-b which has the actual cost basis
This. My 1099-B is never accurate because the cost basis is reported as 0. Check whats the cost basis on your 1099-B, refer the supplement if is 0 and adjust the cost basis on your tax return.
So my 1099-B was inaccurate when I was doing my return and had cost basis at 0, and I fixed that and still owe. For RSU vesting though doesn’t this not apply? I actually don’t see anywhere in my E*trade tax documents that say how many shares were sold to cover the taxes (but in the website itself it shows 157 sold to 137 kept)
You got to transfer to Austin man. That’s wild.
Open to switching orgs 👀
California will keep taxing your vests even after you move out if it was granted when you lived in CA.
Because California always finds a way to make you pay
Look at the extra taxes you get for earning a higher income. There is additional tax for high net earners above $200k single filers as well.
So with 363k taxable income (post 401k) you paid 86k in federal tax. Based on https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets#:~:text=There%20are%20seven%20federal%20income%20tax%20rates%20and%20brackets%20in,you'll%20owe%20that%20year. You need to pay 52.8k + 32% of income above 231k So you should be paying 99k on fed taxes and you paid 86. Sounds about rightish. Adjust for your personal numbers and family situation
Hmm yeah that seems right based on what you shared. Does that mean that the regular single person withholding doesn’t set enough away in taxes for me? The thing that gets me is that I’m selling 20 shares over half of my RSU vests to cover taxes and that doesn’t make sense
You need to update your W-4 in pay portal to withhold more from your normal paycheck. The IRS has a calculator you can use to properly set it. https://www.irs.gov/individuals/tax-withholding-estimator. If this is your first year owing that much it’s not a problem but if you have similar pay next year, and don’t, you could get hit with penalties and interest.