Why did my employer under-withhold on my RSUs?

They did not make a mistake. An RSU vest counts as supplemental wages, and the regulations set one flat withholding rate for the whole category. Payroll applies it. It has no view of your total income and takes no account of the bracket you are actually in, so for most people receiving a large vest, every vest is short by the difference between that flat rate and their real one.

Is this a penalty, or just a timing difference?

The tax itself is not extra: you owe what you owe either way. What changes is when you pay it and whether you are surprised. It can become a real cost if you underpay by enough to trigger an underpayment penalty, which is why the size of the gap matters rather than just its existence.

Why is the shortfall bigger than the difference between the two rates?

Because a vest stacks on top of your salary rather than being taxed on its own. The vest fills whatever is left of your current bracket and then spills into higher ones, so the last dollars of a large vest can be taxed well above your rate on the first dollars. This calculator takes the difference between your total tax with the vest and without it, which is the only framing that captures that.

What can I do about it?

The usual options are increasing withholding on your regular paycheck for the rest of the year, making a quarterly estimated payment, or setting the money aside and paying at filing. Which is right depends on the size of the gap and whether you are exposed to an underpayment penalty. This is the point at which the answer stops being arithmetic, so it is worth asking someone who can see your whole return.

Does it include Social Security and Medicare?

Partly, and the split is deliberate. Social Security and the base 1.45% Medicare tax are withheld at flat rates that match what you owe, so they do not open a gap at filing, and they are not included. The 0.9% Additional Medicare Tax is different: it has one threshold for what your employer withholds and another for what you owe, so it can go under-withheld exactly like federal income tax does. That one is included.

Why would my employer under-withhold the 0.9% Medicare surtax?

Because the law gives it a different threshold from yours. Your employer must start withholding the surtax once it has paid you more than $200,000, counting only the wages it pays you. What you actually owe is measured against your filing status and every wage on your return, including a second job or a spouse's on a joint return. Your employer cannot see those, so it cannot withhold against them. If you file separately the gap opens sooner still, because your own threshold is $125,000 while your employer is still waiting for $200,000. Whatever was not withheld is settled on Form 8959 with your return.

Where does what I type go?

Nowhere. The whole calculation runs in your browser. The figures are encoded into the address bar so a scenario can be shared or bookmarked, and they are encoded rather than written in plain text so a copied link does not spell out your salary in server logs along the way.

RSU Withholding Shortfall Calculator

Updated September 23, 2026

Enter a vest and see what it actually costs against what payroll withheld. Two gaps open on the same wages, for the same kind of reason, and both are worked out below.

Your employer withholds federal tax on an RSU vest at a flat 22%. If your marginal rate is 32% or 35%, the rest is due when you file. A second gap can open on the 0.9% Medicare surtax, because your employer withholds against the $200,000 it pays you while you owe against every wage on your return.

Value of this vest

Gross value on the vest date, before any shares are withheld.

Your other income this year

Base salary plus anything else taxed as ordinary income.

Supplemental wages already paid this year

Earlier vests, bonuses and PTO payouts. They count toward the higher flat withholding rate.

Wages from another employer or a spouse

A job you held earlier this year, a second job, or your spouse's wages if you file jointly. Count it inside your other income above as well. This field only says how much of that the employer issuing the vest cannot see.

Filing status

Likely shortfall at filing

$25,330.25

Federal income tax owed: $68,430.25
Withheld at 22%: −$44,000.00
Income tax gap: $24,430.25
Medicare surtax gap: $900.00
Marginal rate: 35.00%
Effective rate on the vest: 34.215%

State tax, Social Security and the base Medicare rate are not included.

critical: Withholding is below your marginal rate

Payroll withholds at a flat supplemental rate, which is lower than the rate this vest is actually taxed at. The difference is due when you file, and it is not an error by your employer.

critical: The Medicare surtax was under-withheld too

Your employer withholds the 0.9% Additional Medicare Tax on the wages it pays you, above a flat threshold it applies to every employee. What you owe is measured against your filing status and every wage on your return, including a second job or a spouse's. Your employer cannot see those, so the difference is yours to settle at filing on Form 8959.

warning: State tax is not included

This is federal income tax only. States with income tax apply their own supplemental withholding rate, and the same gap can open there.

What this does not cover (3)

info: The surtax treats your other income as wages

The 0.9% surtax applies to wages, not to interest, dividends or capital gains. If part of your other income is not wages, the split between withheld and owed shifts even though the gap between them usually does not. Investment income can instead face the separate 3.8% Net Investment Income Tax, which this does not model.

info: Social Security and base Medicare are not included

Those are withheld at flat rates that match what you owe, so they do not open a gap at filing the way the two figures above do. Social Security also stops at an annual wage cap, which a large vest may already have passed.

info: An estimate, not advice

Educational only, and it does not model credits, deductions beyond the standard deduction, or anything specific to your return. Consult a qualified professional before acting.

What this assumes

Assumption set tax 2026

Tax year: 2026
Deductions: Standard deduction only
Vest value: $200,000.00
Method: Incremental: tax with the vest minus tax without it
Surtax wage basis: Split between this employer and others, as entered

How this works

Your vest counts as supplemental wages, the tax term for pay that is not your regular salary. Bonuses, commissions, PTO payouts and RSU vests all sit in that category. The rules let payroll withhold on them at a single flat rate rather than work out the rate that fits your year, and that is where the problem starts. The flat rate is a stand-in. For most people receiving a large vest it is a low one.

A second, higher flat rate applies to supplemental wages above an annual threshold. Earlier vests and bonuses count toward it, which is why this page asks about them.

The tax the vest actually costs is calculated incrementally: your total federal income tax with the vest included, minus your total tax without it. That matters more than it sounds. A vest is not taxed at some average rate of its own. It lands on top of your salary and fills the brackets above it, so the last dollars of a large vest can be taxed several bands higher than the first.

The shortfall is the difference between those two figures. It assumes the standard deduction, and credits and itemised deductions are out of scope.

A vest opens a second gap on the same wages, for the same kind of reason. The 0.9% Additional Medicare Tax has two thresholds that are not the same quantity: your employer withholds once it has paid you more than $200,000, counting only its own payroll, while what you owe is measured against your filing status and every wage on your return. A second job or a spouse’s wages are invisible to your employer, and filing separately lowers your own threshold to $125,000 without moving your employer’s. Both gaps are shown separately above, and added together, because they have the same cause but different fixes.

State income tax, Social Security, the base 1.45% Medicare tax and the separate 3.8% Net Investment Income Tax are not modelled, and the result says so rather than quietly leaving them out.

Worked example

Priya is single. She earns $220,000 in salary this tax year and a $200,000 RSU grant vests in November. She changed jobs in June, so $100,000 of that salary came from her previous employer and $120,000 from the one issuing the vest. She takes the standard deduction and has had no other supplemental pay this year.

What payroll withheld on the vest

The vest is supplemental wages, so her employer withholds federal income tax at the flat 22.00% rate. Her cumulative supplemental wages for the year stay well below the $1,000,000 threshold, so none of it is withheld at the higher rate.

$200,000 × 22.00% = $44,000.00 withheld.

What the vest actually costs in income tax

Her taxable income without the vest is $220,000 − $16,100 = $203,900. With it, $420,000 − $16,100 = $403,900. The vest is the difference between the tax on those two figures, because it lands on top of her salary rather than being taxed on its own:

The $200,000 vest stacked on top of $203,900 of already-taxed income
Band	Of the vest	Tax
32% band	$52,325.00	$16,744.00
35% band	$147,675.00	$51,686.25
Total	$200,000.00	$68,430.25

$68,430.25 owed − $44,000.00 withheld = $24,430.25 short. Payroll withheld at 22.00% against a marginal rate of 35%, on a vest large enough to cross a bracket on the way up.

The second gap, on the same wages

Priya’s wages for the year total $420,000, which puts her past the threshold for the 0.9% Additional Medicare Tax. Two different thresholds apply, and this is where the second shortfall comes from:

Her employer withholds on the wages it paid her above $200,000. That is $120,000 of salary plus the $200,000 vest, or $320,000, so it withholds on $120,000. At 0.9% that comes to $1,080.00.
She owes on every wage on her return above her own $200,000 threshold. That is $420,000 − $200,000 = $220,000, so 0.9% × $220,000 = $1,980.00.

The $100,000 her previous employer paid her is the difference. Neither employer did anything wrong: her old job never reached $200,000, and her new one withheld on every dollar it could see. Nobody was in a position to withhold on the overlap.

$1,980.00 owed − $1,080.00 withheld = $900.00 short, settled on Form 8959 with her return.

What she owes at filing

$24,430.25 + $900.00 = $25,330.25 in federal tax on top of everything already withheld, from a vest that looked like it had been taxed at source. Both gaps have the same cause. A flat withholding rule is meeting a liability that is not flat.

Had Priya stayed with one employer all year, the surtax gap would have been zero. Her employer’s $200,000 threshold and her own would have matched exactly, and only the $24,430.25 would remain. Had she been married filing separately, the surtax gap would have opened at $125,000 instead. The calculator above takes both cases.

What this does not tell you

Whether you will owe an underpayment penalty, which depends on your total payments across the year rather than on any single vest. Whether increasing withholding or making an estimated payment is the better move for you. Anything about the decision to hold or sell the shares, which is an investment question and not a tax one.

It also does not know which of your income is wages. The Medicare surtax applies to wages, not to interest, dividends or capital gains, so if a large part of your other income is not pay, the split between withheld and owed shifts, though the gap between them usually does not. Investment income can instead face the 3.8% Net Investment Income Tax, which has its own thresholds and is not modelled here.

Sources

References used to explain this page. Listing a publisher is not a claim that they endorse it.

IRS supplemental wage withholding, Publication 15 (Circular E). The flat supplemental withholding rate applied to RSU vests and bonuses, and the higher rate above the annual threshold.
IRS annual inflation adjustments Revenue Procedure. Bracket thresholds, standard deduction, capital-gains thresholds, QBI limits.
IRS Additional Medicare Tax, Form 8959 and its instructions. The 0.9% rate, the filing-status thresholds an employee owes against, the flat threshold an employer withholds against, and how the difference is reconciled on a return.

Figures are transcribed from these documents directly. Where a value has not been verified against its source, this page shows no number rather than an estimate.

Questions

Why did my employer under-withhold on my RSUs?: They did not make a mistake. An RSU vest counts as supplemental wages, and the regulations set one flat withholding rate for the whole category. Payroll applies it. It has no view of your total income and takes no account of the bracket you are actually in, so for most people receiving a large vest, every vest is short by the difference between that flat rate and their real one.
Is this a penalty, or just a timing difference?: The tax itself is not extra: you owe what you owe either way. What changes is when you pay it and whether you are surprised. It can become a real cost if you underpay by enough to trigger an underpayment penalty, which is why the size of the gap matters rather than just its existence.
Why is the shortfall bigger than the difference between the two rates?: Because a vest stacks on top of your salary rather than being taxed on its own. The vest fills whatever is left of your current bracket and then spills into higher ones, so the last dollars of a large vest can be taxed well above your rate on the first dollars. This calculator takes the difference between your total tax with the vest and without it, which is the only framing that captures that.
What can I do about it?: The usual options are increasing withholding on your regular paycheck for the rest of the year, making a quarterly estimated payment, or setting the money aside and paying at filing. Which is right depends on the size of the gap and whether you are exposed to an underpayment penalty. This is the point at which the answer stops being arithmetic, so it is worth asking someone who can see your whole return.
Does this include state tax?: No. It models federal income tax only. States with an income tax generally apply their own supplemental withholding rate, and the same gap can open there. It is sometimes wider, because state supplemental rates often sit further below the top marginal rate.
Does it include Social Security and Medicare?: Partly, and the split is deliberate. Social Security and the base 1.45% Medicare tax are withheld at flat rates that match what you owe, so they do not open a gap at filing, and they are not included. The 0.9% Additional Medicare Tax is different: it has one threshold for what your employer withholds and another for what you owe, so it can go under-withheld exactly like federal income tax does. That one is included.
Why would my employer under-withhold the 0.9% Medicare surtax?: Because the law gives it a different threshold from yours. Your employer must start withholding the surtax once it has paid you more than $200,000, counting only the wages it pays you. What you actually owe is measured against your filing status and every wage on your return, including a second job or a spouse's on a joint return. Your employer cannot see those, so it cannot withhold against them. If you file separately the gap opens sooner still, because your own threshold is $125,000 while your employer is still waiting for $200,000. Whatever was not withheld is settled on Form 8959 with your return.
Where does what I type go?: Nowhere. The whole calculation runs in your browser. The figures are encoded into the address bar so a scenario can be shared or bookmarked, and they are encoded rather than written in plain text so a copied link does not spell out your salary in server logs along the way.

Why RSU withholding falls shortThe mechanism behind the gap, and why it is not your employer's error.
Sell to cover, explainedWhat your employer sells on vest day, and why it rarely covers the bill.
Covering an RSU shortfallExtra withholding, an estimated payment, or paying at filing.