Why Apple Employees Owe Taxes Every Year

For some Apple employees, it can be a baffling yearly experience to find more taxes are owed than expected.

Often, the question is left unanswered as to why this occurs annually. The answer is usually quite simple – RSU withholdings.

By default, Apple withholds 22% for Federal taxes and 10.23% for CA taxes.

*Note: Above Data is from 2020

These rates are typically not enough. The 22% bracket for a married joint filer is $80,251 – $171,050*. Some Apple employees earn this much in RSU income alone.

RSUs are only taxed on the date of vesting. The date of grant is not a taxable event. Because of the overlap of grants over time, the RSU income can start to pile up, especially after 4 years. To watch a video explanation of this, please go here.

How To Determine Your Withholding %

To determine how much to withhold from your RSUs, follow these steps.

1. Determine current withholding %
   • Vist the “myMoney” tab of “myPage” and choose Taxes > RSU Withholding.
2. Calculate annual salary and bonus
3. Determine how many gross (before taxes are taken out) RSU shares will be received for the calendar year. This is done by following these steps:
   • Log – in to E*TRADE
   • Click on “Stock Plan”
   • Stay on the “Overview Page” and scroll down to the “Scheduled Upcoming Events” section. 
   • Add up the total share amount for the vest periods (most commonly 10/15 and 4/15).
   • Multiply this share amount by the current AAPL stock price.
   • Add this figure total to the salary and bonus total.
   • Place total income on the Fed and CA tax bracket to determine marginal tax bracket rate.

*Note: Above Data is from 2020

For further clarification, an example is provided below:

• Current Withholding:
  • Federal 22%
  • CA: 10.23%
• Salary and Bonus
  • $200K.
• Gross Vesting Shares:
  • April 15^th:
    • 358, 10, 250, and 230
  • October 15^th:
    • 228, 358, 248, and 478
  • Total = 2,157.
  • Current AAPL Price = $150
  • 2,157 * $150 = $323,550
• Total Income
  • $200K + $324K = $523,550.

This is a hypothetical example meant for illustrative purposes only.

Placing $524K on the tax tables above demonstrates that a more appropriate tax withholding % should be 35% Federal and 12% state, not 22% Federal and 10.23% State.

Following the above steps provide a more consistent tax situation. However, there are circumstances where less or more withholdings are needed. As Wealth Advisors, we look at each client’s situation independently to determine the wisest approach. Should you have questions about your RSUs or how to maximize your financial relationship with Apple, please don’t hesitate to schedule a complimentary Zoom call by clicking here.