Death and... Taxes.

Rangoth · Jul 6, 2024

I believe they would be taxed as regular old w2 income of Their value on the day you receive them. If you hold the shares and sell a year later you can pay long term capital gains instead of short, but you are on the hook for their value right now when you get them either way.

Whatever the current valuation, public is easy to get, private a little harder but you should be able to ask, x the number of RSUs you are getting will be taxed as regular income since RSU are free and not like normal options if memory serves. You are taxed at their value on the day you receive them.

so 1000 shares at 1.00 share price = extra 1,000.00 on your W2. I don’t know what bracket you re in so you’ll have to do some math, but low end would be 25% high end closer to 40-50%(state + federal). so to be 100% safe you could sell to cover half and use that for taxes, but usually it’s a bit less than half and for normal people would tend to be around 33%.

edit: if you tell them you want to sell to cover they can help you a bit with the math too

Captain Suave · Jul 6, 2024

Foler said:
I’m getting my next RSU vest next month. I’ve elected sell to cover. I’m trying to get a rough estimate of how much will actually be sold to cover. Any suggestions how?

Also, I think I missed the deadline with my employer to modify my tax withholding. I’d like to withhold as little as possible without incurring a penalty. I’m OK with a big federal tax bill versus lending the gov money interest free. I’m not OK for being penalized financially for withholding too little.

Any suggestions on how to calculate this? If I calculate it and my math adds up to be projected under withholding can I make a contribution myself pre-tax season to avoid penalty?

There are estimated tax calculators you can use for this. If the money doesn't clear until Q3/4 you can probably also get away with saying that you have unevenly distributed income and they'll waive the underpayment penalty. I have a consulting business with very lumpy cash flows and I do this literally every year. I don't think I've ever paid a penalty.

As far as the amount to be sold, your company's HR/finance department should be able to tell you.

Haus · Jul 6, 2024

Foler said:
I’m getting my next RSU vest next month. I’ve elected sell to cover. I’m trying to get a rough estimate of how much will actually be sold to cover. Any suggestions how?

Also, I think I missed the deadline with my employer to modify my tax withholding. I’d like to withhold as little as possible without incurring a penalty. I’m OK with a big federal tax bill versus lending the gov money interest free. I’m not OK for being penalized financially for withholding too little.

Any suggestions on how to calculate this? If I calculate it and my math adds up to be projected under withholding can I make a contribution myself pre-tax season to avoid penalty?

Calculate your overall tax rate (federal + state) as a percentage of your income. It should come out to something like 30-35%. Assume they're going to sell around that . My company always does sell to cover on RSU grants. It's made my W2 income every year for the last few years just stupid.....

Gutterflesh · Sep 28, 2024

So I get a letter from these motherfuckers wanting more money.

Fuck it. Leave me alone.

I'll pay it.

But do these cock suckers really have to rub it in?

Nabi · Nov 14, 2024

Recently found 300k in cash that my father left in the garage. He passed away last year and we went through probate court. All he had left was a 401k and a car. Surprisingly no bank account when he passed. I guess he stashed it there. Anyway I can avoid paying taxes on it?

Szeth · Nov 14, 2024

Nabi said:
Recently found 300k in cash that my father left in the garage. He passed away last year and we went through probate court. All he had left was a 401k and a car. Surprisingly no bank account when he passed. I guess he stashed it there. Anyway I can avoid paying taxes on it?

Use it over the next few decades for things you can spend cash on? Literally every small purchase - cash.

Sanrith Descartes · Nov 14, 2024

Nabi said:
Recently found 300k in cash that my father left in the garage. He passed away last year and we went through probate court. All he had left was a 401k and a car. Surprisingly no bank account when he passed. I guess he stashed it there. Anyway I can avoid paying taxes on it?

Were you the sole beneficiary of his estate? If so, and assuming his 401k wasn't in the millions then this would be covered under the inheritance exemption and be tax free. Let the lawyer who handled the probate know you found "some" cash in a safe in his house and ask him about amending the probate. Once the court recognizes the money its tax free to use and the IRS will never ask you about it.

If some of the items above don't apply, then do what Szeth said and spend it quietly and in reasonable increments each year. You can also go to Cosco and start buying gold bars and collect them over time.

Nabi · Nov 14, 2024

I've been doing that and depositng a couple thousand at a time randomly. Would like to just deposit it and invest it since I'm a shutin living the Sean life. Should I just give however much % to uncle sam? Overtime i guess it will be a net gain?

Sanrith Descartes · Nov 14, 2024

Nabi said:
I've been doing that and depositng a couple thousand at a time randomly. Would like to just deposit it and invest it since I'm a shutin living the Sean life. Should I just give however much % to uncle sam? Overtime i guess it will be a net gain?

As I said before, if you are the sole beneficiary, you owe the IRS nothing. You just have to follow the procedures. Depositing all that cash at one time?

Falstaff · Nov 14, 2024

Yeah, and all banks are tracking deposits because of anti money laundering standards they adhere to. If you try to trickle in deposits below some limit (like under 10k or under 5k) they will pick up on it no matter how clever you’re being.

BrutulTM · Nov 15, 2024

As Sanrith said, as long as the total inheritance is less than $13.6M then the IRS will not bother you. If you live in Iowa, Kentucky, Maryland, Nebraska, New Jersey, or Pennsylvania then the state might want a bite, but you'll have to figure that out for yourself. Best to just come out with it and avoid being investigated for money laundering etc. Alternatively, dump it all into BTC since it's at an all time high.

Rangoth · Nov 16, 2024

Dude it’s cash. I’d never say a thing to anyone. Do exactly what you are doing.
Spend or deposit small amounts at irregular intervals over the next 2-5 years.

if you wanted/needed something. Looks for used things from people who want cash. If you just want to save and invest then keep depositing random different amounts at irregular intervals. Stay away from anything pattern oriented.
Though in reality, almost no chance an avg joe would be audited over something like this. But if you make 50k a year and start depositing 100k a year it may raise a flag.

Borzak · Nov 17, 2024

Treat it like I have always said counterfitters should do, but they don't. I pay cash for a lot of stuff. I know most people use a card 99.99% of the time now. Just think about every time you buy something if you paid cash for only the small stuff like food, gas, groceries. It adds up in a hurry. But they usually try to launder it so they can buy a house or car with it.

I put in cash often at the bank and only rarely do they fill out a form to ask where it came from. I'm not sure if it's rural or what. I sold my boat for cash and we met at the bank and he paid cash and the bank verified it was not counterfit and I signed over the papers and put the money in right there. Be creative lol. A friend gets paid in cash for a lot of stuff and he said the bank never ask, he did tell me he uses the banks notary often and has them notarize some odd piece of paper someone is signing that is not worth anything and then puts the money in no questions asked. Not cheap amounts, stuff like getting your percentage of a timber sale you negotiated and such.

TJT · Feb 23, 2025

Sold some RSU this year.

Almost got caught by this. Sale of RSU does not include cost basis, its on the W2 for the year that you received it.

Understanding and Addressing RSU Double Taxation - Tidemark Financial Partners

tidemarkfp.com

swayze22 · Feb 23, 2025

TJT said:
Sold some RSU this year.

Almost got caught by this. Sale of RSU does not include cost basis, its on the W2 for the year that you received it.

Understanding and Addressing RSU Double Taxation - Tidemark Financial Partners

tidemarkfp.com

This can be easier or harder to get pending on your provider, but E-Trade who manages our stock plan, provides all of that information fairly easy. FMV at grant, FMV at vest, etc.

I used to think RSUs were super complicated but basically all that matters is that they are treated as ordinary income at the vest date, and if you hold after vesting for whatever reason, remembering to calculate the cost basis/fmv from the vest date like you are referencing.

I work for a (now) larger "start-up" but I still think it makes most sense to shed the RSUs on vest but YMMV.

EDIT: Adding that the 1099 B usually doesn't show the cost basis and reflects $0, you'll need to review the supplement. If you plan to hold on to RSUs for more then 5 or 7 years most places don't retain that documentation as far as I can tell so you have to be good about recordkeeping.

sliverstorm · Feb 24, 2025

TJT said:
Sold some RSU this year.

Almost got caught by this. Sale of RSU does not include cost basis, its on the W2 for the year that you received it.

Understanding and Addressing RSU Double Taxation - Tidemark Financial Partners

tidemarkfp.com

This is a good callout.

More broadly, Fidelity's consolidated 1099 will split out the separate form sections for any short-term and long-term transactions with an unreported cost basis. If you import into tax software, the cost bases will come in as zero, but it's pretty easy to scan the doc and see if you have any that need addressing.

e.g.

At least HRBlock, which I use to file, will also flag any 0 cost basis transactions you import as "requiring an update", so that you are directed to go back and manually enter before proceeding.

Koushirou · Saturday at 4:52 AM

Not quite sure where to put this, but anyway, when I bought my house a few years ago I had taken a loan on my 401k to help with my down payment. Thought this was a normal thing, but maybe I was dumb? Talked with Fidelity the other day just to go over options of what to do with my 401k and also I wanted to setup my payment for that loan, since it wasn’t coming out of my paycheck anymore since I lost my job. Apparently I have no option to keep making regular/partial payments on it and I can now only pay off the entirety of the rest of the loan in one lump sum by the end of the next quarter. If I don’t, I’m gonna default and eat that remainder as a distribution.

I’m pretty ignorant in this space, but this feels like fucking bullshit and I don’t know what to do. Seeing as I have no job, just having a cool $15k on hand is not a reality for me (unless I use the entirety of my severance paying it, which means I’m immediately now burning through my emergency savings and takes me from having 5 months of funds to 1-2 in which I can find a new job), and I can’t go get a personal loan to pay it off, since, again, no job so who’s going to give me one, and that seems like it’d be a bad idea anyway with the interest rates. Feel like I’m just going to have to deal with having the distribution, getting hosed at tax time plus the early withdrawal penalty, etc. Also, since this is a default, isn’t my credit going to get shit on, too?

Im supposed to be getting some letter with more details about this shit within…45 fucking days. When’s that quarter end, btw? Any ideas of what to do here? I’m pretty clueless in this field.

Jysin · Saturday at 6:14 AM

I mean, in fairness, even if you were at retirement age, you would be paying taxes on a 401k withdrawal. The only "penalty" you are paying right now would be 10%.

So, if you said it is a 15k loan you took, you owe $1500 penalty plus whatever taxes (depends on your tax bracket) on the distribution.

(We are of course completely ignoring opportunity cost if you had left it alone in the first place.)

BrutulTM · Saturday at 9:19 AM

Yeah, don't borrow money from your 401k unless you can put it back within 60 days. Most expensive loan you can take out.

Furry · Saturday at 11:50 AM

BrutulTM said:
Yeah, don't borrow money from your 401k unless you can put it back within 60 days. Most expensive loan you can take out.

I did a 401k loan so I could pay cash for my new car. 25k at ~1% interest (feb22) and like a 50$ fee, where all the interest comes back to me. I'm at the point where I'll just pay it back as a lump sum at the end of the year probably, like 8500 left. I probably could have paid it off faster, but felt it was just smarter to max my 401k/roth and let the loan ride. I had replaced the entire loan amount within 1 year, so the opportunity cost was fairly negligible.

If for some reason I lost my job and had to eat it as a disbursement, it really won't be a big deal. I view my roth as my emergency fund since I can withdraw the principle amounts without any penalty whenever I want, and that's closing in on 100k. And financially I viewed the 401k loan as superior to taking form the roth, because the roth money can't go back in, so I need a true emergency before diddling in that.

I don't think 401k loans are a bad idea at all if you are financially prepared for bad outcomes. If I had gone the traditional route of a bank/dealership loan I'd have spent more money.

Edit: And to say what I'd do in

Koushirou 's position. I'd eat the disbursement most likely. Semi depending on how big a number we're talking about. If you're unemployed, your tax burden will be pretty low most likely. Additionally, aggressively pursue a waiver on the 10% fee, because the money went to your primary residence. Doing that, you'll probably get the tax down to around 10-12% of whatever the amount is, which is payable next year. It shouldn't count as a default or anything like that. It's your money, and the payment you need to make is just the taxes next year.

From there, live cheap, find a job, and probably hire someone competent to do your taxes next year.

Death and... Taxes.

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