Does the withholding rate change if your income is higher? I make about $180k and my company withholds 37% on RSUs which seems excessive, but maybe that's correct?

Yes, the withholding rate does change at higher income levels. For supplemental wages (including RSUs) over $1 million, the mandatory withholding rate is 37%. For supplemental wages under $1 million, the employer can choose either a flat 22% rate or aggregate the amount with your regular wages and withhold at your normal income tax rate. If your company is withholding at 37% for all RSU vesting regardless of amount, they're using a conservative approach that will likely result in overwithholding for most employees. This isn't incorrect, just cautious. Some companies do this to ensure employees don't end up with unexpected tax bills. You'll get any excess back when you file your return, or you could adjust your W-4 on your regular paychecks to compensate.

Wow, I didn't even think about the state tax aspect! That could definitely explain part of the difference I'm seeing. I'll have to go back and look more carefully at my vesting statements to see the breakdown of federal vs state withholding. Thanks for pointing this out!

Happy to help! Also check if your company does any FICA (Social Security/Medicare) withholding on the RSUs too. Some companies handle this by withholding extra shares, while others might reduce your next regular paycheck to cover these taxes. That's another reason your "received" amount might be less than what shows up as income on your W2.

Love this Sims-like approach! Would there be different character "classes" like entrepreneur vs. employee? Each would have different tax situations and strategies. Also would be cool to have seasonal events like tax season, open enrollment for benefits, etc.

Absolutely! Different career "classes" would be a fantastic way to introduce various tax situations. Entrepreneurs would deal with self-employment taxes, quarterly estimated payments, and business deductions. Employees would focus on W-2 optimization, benefit elections, and retirement account choices. Seasonal events would definitely be included! Tax season would be a major yearly milestone, with preparation activities in the months leading up to it. Open enrollment periods would prompt players to make healthcare decisions that impact both their tax situation and financial security. I'd also include annual financial checkpoints where players review their progress and adjust their strategies for the coming year.

An investment competition would be fun, but I think plenty of people would play a tax game if done right! Look at how popular games like Papers Please became - literally about checking documents. If you make the mechanics satisfying and include enough strategy elements, even "boring" subjects can become addictive. Tax optimization is basically a puzzle game anyway!

This is so important! My brother thought he could just reclaim his property when a buyer defaulted on owner financing, but it turned into a legal nightmare because he didn't follow the proper foreclosure procedures in his state. The tax implications were also way more complicated because of it.

Exactly right. Each state has different laws regarding owner financing and foreclosure requirements. Some states treat these transactions like mortgages requiring judicial foreclosure, while others allow for simpler processes if you used a land contract or contract for deed. The tax implications directly tie to the legal process. If you don't properly document the default and reclamation according to your state's laws, you could have trouble justifying your tax treatment to the IRS. It's worth consulting with a real estate attorney who specializes in your state's foreclosure laws before finalizing your tax approach.

You should be able to add those legal fees to your basis in the property since they're directly related to defending/clearing title. They're not immediately deductible expenses but get factored into your basis, which will reduce any gain when you eventually sell the property again.

Do you know if we need to get the 1099-R corrected before we file, or can we just file with the explanation that it's incorrect? The tax filing deadline is coming up soon and I'm worried the credit union won't fix this in time.

You really want to get the corrected 1099-R before filing if at all possible. Filing with an explanation that contradicts the 1099-R information the IRS has on file often triggers correspondence audits or notices. If you're running close to the deadline, file an extension to give yourself more time to get this corrected. An extension gives you an additional six months to file (though not to pay, but in this case the correct tax should be much lower or zero). The credit union should be able to issue a corrected 1099-R within a few weeks if they acknowledge their mistake.

Actually, the 10% early withdrawal penalty doesn't apply to distributions to beneficiaries after death, even if the beneficiary is under 59.5. That's one of the exceptions listed in the tax code. But they would still owe regular income tax on the distribution if it's not corrected.

Do you set aside a separate bank account for this? I've tried to do quarterly payments but always end up spending the money I should be saving for taxes.

Yes, I have a separate savings account specifically for taxes! This was game-changing for me. Every time I get paid, I immediately transfer 30% to this account. I don't even think of that money as mine - it's already the government's money that I'm just holding temporarily. Some banks let you create sub-accounts with different names, which helps mentally. I named mine "NOT MY MONEY - TAXES" to remind myself not to touch it except for quarterly payments. Having it separate from your main checking account removes the temptation to spend it.

Wait really? Interest on tax payments can be deducted? That's amazing, I paid about $400 in interest because I was on a payment plan. Do you know which form this goes on?