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Philip is a newly minted executive at a publicly traded Bay Area technology company. He enjoys a healthy salary and receives an ample number of RSUs annually. Last year, in reviewing his tax filings with his CPA, Philip was shocked to have an exorbitant tax bill. He had followed his company’s guidelines for selling enough shares to pay the 22% Federal and 9.3% State income taxes during the tax year. However, being a California resident in the highest Federal and State tax brackets, he had largely underestimated his specific financial scenario, leaving him with tens of thousands of dollars in taxes due, including penalties and interest.
RSUs are a significant portion of Philip’s ordinary income. He does not want to face another tax bill like that of last year, nor should he be subject to avoidable penalties and interest.
While onboarding Philip as a Summitry client, his advisory team identified the need to create a tax strategy that would minimize his exposure to tax liability, not only considering his RSU income but his entire balance sheet. Philip’s senior financial advisor, Aaron, ran his prior year’s tax return through Summitry’s sophisticated tax planning software and carefully analyzed opportunities for savings. Aaron then created a forward-looking projection to establish quarterly estimated tax payments that would align with this year’s RSU transactions, avoiding penalties and interest. The team has regular quarterly meetings to review changes and make adjustments to the plan as needed.
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*Actual client situation with the names changed for privacy. Please see disclaimer below.
This case study contains an actual client situation with the names changed in which Summitry has provided financial planning advice. There is no guarantee that similar results will be achieved for other financial planning clients. It is unknown if the clients on which this case study is based approved or disapproved of Summitry's services. Summitry's advice is based each client's specific situation and contains multiple factors. Summitry may make recommendations to one client that may differ from the advice given to another client.
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Advisor Group Manager