Family Wealth Services - Flex Tax and Consulting Group (FTCG) https://flextcg.com/category/family-wealth-services/ FTCG is an accounting, tax and business consulting corporation located in San Francisco. Sat, 25 Oct 2025 04:42:41 +0000 en-US hourly 1 https://wordpress.org/?v=7.0 169223839 Selling RSUs or ESPP Shares Without a Tax Plan: How to Avoid Overpaying the IRS https://flextcg.com/selling-rsus-or-espp-shares-without-a-tax-plan-how-to-avoid-overpaying-the-irs/ Sat, 25 Oct 2025 04:42:41 +0000 https://flextcg.com/?p=10182 Selling RSUs or ESPP Shares Without a Tax Plan: How to Avoid Overpaying the IRS Equity compensation can be a powerful wealth-building tool — but without careful tax planning, it often becomes a hidden tax trap.Every year, we meet clients who thought selling their company stock was simple: “I’ll just sell my RSUs when they […]

The post Selling RSUs or ESPP Shares Without a Tax Plan: How to Avoid Overpaying the IRS appeared first on Flex Tax and Consulting Group (FTCG).

]]> Selling RSUs or ESPP Shares Without a Tax Plan: How to Avoid Overpaying the IRS

Equity compensation can be a powerful wealth-building tool — but without careful tax planning, it often becomes a hidden tax trap.
Every year, we meet clients who thought selling their company stock was simple: “I’ll just sell my RSUs when they vest.”
What they didn’t realize is that the timing, reporting, and coordination of those sales can make a difference of thousands of dollars in extra taxes — even when everything seems properly reported on their W-2.

At Flex Tax & Consulting Group, we specialize in helping employees and executives understand the true tax cost of equity income.
Let’s break down how Restricted Stock Units (RSUs) and Employee Stock Purchase Plans (ESPPs) are taxed — and how a personalized strategy can protect your hard-earned equity.

Understanding How RSUs Are Taxed

Restricted Stock Units are a form of compensation your employer grants as part of your pay package. You don’t own the shares until they vest — that’s when they become legally yours and taxable.

When your RSUs vest, their fair market value is added directly to your W-2 as ordinary income. This means:

  • You pay federal, state, Social Security, and Medicare taxes on that value.
  • Most companies automatically withhold some shares to cover taxes, but the default withholding rate (often 22% federal) may be far lower than your actual marginal rate if you’re a high earner.

For example:
If 1,000 RSUs vest at $100 per share, you’ll report $100,000 of ordinary income.
If you later sell at $120, the $20,000 difference is considered a capital gain.
Sell within one year, and it’s short-term (taxed like income). Hold longer than a year, and it’s long-term (taxed at 15–20%, depending on your bracket).

This simple difference in timing can mean thousands of dollars in additional savings.

However, RSUs create another challenge: they can push you into a higher tax bracket or trigger phaseouts for credits and deductions. Without adjusting your withholdings or making estimated payments, you might face a surprise balance due the following April.

That’s why a proactive RSU plan doesn’t just focus on “when to sell” — it integrates cash-flow management, bracket control, and timing of charitable deductions or retirement contributions to offset that spike in income.

Understanding How ESPPs Are Taxed

Employee Stock Purchase Plans let you buy your company’s stock at a discount — usually between 5% and 15%. While that sounds simple, the IRS applies two layers of tax rules depending on how long you hold those shares.

When you purchase shares through an ESPP, the discount you receive is considered ordinary income.
What happens next depends on how long you keep the shares:

  • If you hold them at least two years from the offering date and one year from the purchase date, the sale qualifies as a “qualified disposition.”
    In that case, only the discounted portion is taxed as ordinary income, and the rest of your gain is long-term capital gain, which enjoys a lower rate.
  • If you sell before meeting those timelines, it’s a “disqualifying disposition.”
    The entire gain — from purchase price to sale price — is treated as ordinary income, potentially taxed up to 37% federally (plus state tax).

For instance, let’s say you buy ESPP shares at $85 when the market price is $100 and sell later at $120.
If it’s a disqualifying sale, you’ll owe ordinary tax on the entire $35 per share.
If it’s qualifying, only the $15 discount is ordinary income, and the $20 difference is long-term capital gain — typically taxed much lower.

Why Holding Periods and Timing Matter

The key to optimizing RSU and ESPP taxes is understanding that the calendar controls your tax rates.
Selling the day after vesting might minimize market risk but maximizes your tax rate.
Holding too long might lower your tax rate but expose you to price volatility.

Strategic timing — especially when you coordinate it with your salary, bonuses, or year-end tax moves — can achieve a balance:

  • Selling enough RSUs early to cover your tax liability.
  • Holding selected ESPP shares until the qualifying date for lower rates.
  • Offsetting large stock gains with tax-loss harvesting in your brokerage portfolio.
  • Making charitable stock donations of appreciated shares for double benefits (deduction + no capital gain).

These aren’t one-size-fits-all decisions. The “best” strategy depends on your income level, state of residence, employer’s stock performance, and cash flow needs.

Common RSU and ESPP Mistakes We See

  1. Selling all RSUs immediately after vesting without modeling the tax outcome.
    Many employees assume the company’s withholding covers everything. It rarely does, leading to unexpected tax bills.
  2. Failing to coordinate RSU income with other compensation.
    Vesting events that align with bonuses, option exercises, or ESPP purchases can push income into a higher bracket unnecessarily.
  3. Ignoring the Alternative Minimum Tax (AMT).
    While RSUs and ESPPs generally don’t trigger AMT, other stock-based incentives (like ISOs) often do — and many professionals hold multiple plans simultaneously.
  4. Reporting errors between W-2 and brokerage forms.
    Brokerage 1099-Bs often omit cost basis adjustments for RSUs, causing double taxation unless corrected.
  5. Overconcentration risk.
    Holding too much employer stock for tax reasons can expose you to company-specific risk — which can undo all tax savings if the stock price falls.

Integrating Equity Compensation Into a Tax Strategy

At Flex Tax & Consulting Group, our advisory process goes beyond tax filing. We:

  • Review vesting schedules and forecast tax impact before year-end.

  • Model multiple sale scenarios (immediate vs. deferred) to estimate real after-tax returns.

  • Coordinate estimated tax payments to avoid penalties.

  • Integrate stock activity with your overall financial plan — including retirement savings, charitable giving, and real estate strategies.

  • Provide audit-ready documentation so your equity reporting is consistent across your W-2, 1099-B, and Form 8949.

Every professional’s equity story is unique — and so should their tax strategy be.

The Bottom Line

RSUs and ESPPs can be a path to significant wealth, but without proactive planning, they often create unexpected tax burdens.
By understanding how and when your shares are taxed — and by modeling your sales before execution — you can keep more of what you’ve earned and avoid year-end surprises.

Whether you’ve just received your first grant or are managing years of accumulated shares, our team can help you design a tax-efficient exit plan tailored to your goals.

Schedule an appointment with us today to discuss your situation – https://flextcg.com/appointment/

The post Selling RSUs or ESPP Shares Without a Tax Plan: How to Avoid Overpaying the IRS appeared first on Flex Tax and Consulting Group (FTCG).

]]> 10182 How to Reduce Your Taxes on Salary Income https://flextcg.com/how-to-reduce-your-taxes-on-salary-income/ Sun, 30 May 2021 19:31:26 +0000 https://flextcg.com/?p=4230 This article was authored working with wikiHow, the world’s largest “how to” site, and also featured here on the wikiHow website. While you may have heard that nothing is certain but death and taxes, it is possible to reduce your US taxes to nearly zero, even when you’re paid a salary. Reduce your taxable income […]

The post How to Reduce Your Taxes on Salary Income appeared first on Flex Tax and Consulting Group (FTCG).

]]>

This article was authored working with wikiHow, the world’s largest “how to” site, and also featured here on the wikiHow website.

While you may have heard that nothing is certain but death and taxes, it is possible to reduce your US taxes to nearly zero, even when you’re paid a salary. Reduce your taxable income by maximizing the money you invest in retirement and contribute to a healthcare savings account (HSA) or flexible spending account (FSA). These contributions (up to a limit) are non-taxable. Once you have your paycheck down to the minimum you need to cover your expenses, make sure you’re claiming all the tax credits and deductions you qualify for each year.

 

Method 1: Making a Salary Reduction Contribution


Open a qualified employer-sponsored retirement account. If your employer offers a 401(k) retirement program, you can contribute up to $19,000 of your annual income to the plan before taxes are withheld for the tax year 2019. The maximum amount is adjusted each year to account for rising cost-of-living.[1]

·       Because this money is taken out of your paycheck before taxes are withheld, you effectively reduce your taxable salary. Depending on the amount of your salary, this could potentially drop you into a lower tax bracket. Regardless, you won’t owe taxes on that money.[2]

·       The tax on your retirement contributions is considered to be deferred. You will pay those taxes when you make withdrawals from your account after you retire.

Tip: If you are 50 or older, you can contribute an additional “catch-up” amount of up to $6,000.

 

Add a 457(b) plan if you work for a qualified employer. If you work for the state or local government, or for a nonprofit organization, you may be able to open a 457(b) plan. Find out from your employer if these plans are offered. If you have access to one, you can contribute up to $19,000 of your annual income to the plan, as of 2019.[3]

·       As with 401(k) contributions, these contributions are tax-deferred. You don’t pay taxes on the money now, so you reduce your taxes on your salary. You will pay taxes on withdrawals after retirement, but presumably, at that point, you’ll have a lower annual income and fall into a lower tax bracket, so you’ll ultimately still pay less in taxes overall.

·       The $19,000 contribution limit is completely separate from the contribution limit for other plans. This means if you have a 401(k) and and 457(b) plan, you can defer taxes on up to $38,000 a year.

·       For example, suppose you are a public school teacher who earns a salary of $48,000 a year. Your spouse is an attorney who earns $150,000 a year, an amount the two of you can easily live on. You can contribute up to $38,000 a year towards your retirement plans, giving you a taxable income of only $10,000. Your household income would, therefore, be $160,000 a year, rather than $198,000.

 

Use an IRA if you don’t have an employer-sponsored retirement plan. Contributions to a traditional IRA may be tax-deductible. The amount you can deduct depends on your modified adjusted gross income (MAGI), your filing status, and your contributions to other retirement accounts. This amount is also adjusted each year to account for increases in the cost of living.[4] [5]

·       Even if you have a 401(k), you may still be able to deduct all or part of your contributions to an IRA. Your total retirement savings, however, cannot exceed $19,000 (as of 2019). For example, if you don’t earn enough money to save the entire $19,000 with your 401(k), you could potentially make up the difference with an IRA contribution.

Tip: You may also be eligible for a saver’s credit on your taxes of up to 50 percent of your IRA contribution. This credit maxes out at $1,000, depending on your adjusted gross income and filing status.

 

Method 2: Opening an HSA or FSA

 

Find out if your employer offers insurance plans with HSAs. A HSA is a savings account where you can save money to cover out-of-pocket health expenses. HSAs are typically offered in conjunction with a high-deductible insurance plan. Contributions to your HSA are tax-free, up to a certain amount. For 2019, the limit is $3,350 for individuals or $6,650 if you have family insurance coverage.[6]

·       You can use the money in your HSA tax-free for medically related expenses, including doctor visits, prescriptions, lab tests, hospital care, and certain over-the-counter medications if they are prescribed by your physician.

·       Your HSA contributions roll over from one year to the next, so you don’t need to worry about losing any of the money you’ve put in your HSA. It will be there when you need it.

 

Set up an HSA on your own if necessary. If you purchase your own insurance, either because your employer doesn’t offer insurance or because you’re self-employed, you can still get the benefits of an HSA by choosing a high-deductible insurance plan.[7]

·       During the open enrollment period, search plans on the marketplace at https://www.healthcare.gov/. Look for plans that include an HSA.

·       High-deductible plans with HSAs typically have a much lower premium. This type of plan may be a good option for you if you are young, in good health, and seldom go to the doctor.

 

Contribute the maximum amount to any employer-provided FSA. FSAs are similar to HSAs, but they are not offered in conjunction with any health insurance plan and are solely provided by employers to their employees. FSAs are typically for health-related expenses, but you can also set up an FSA for dependent care, including child care.[8]

·       FSA contributions are pre-tax and reduce your taxable income. Contributions are typically limited to around $5,100 a year, although this amount may vary depending on your income.

·       If you have expenses that fall under an allowed category for an FSA, it makes sense to have the money deducted from your paycheck before taxes and put in the FSA. Then you can pay for that expense with tax-free dollars. For example, if you pay $500 a month for childcare, you could put $500 a month in an FSA, then pay for the childcare directly from the FSA account.

Warning: With FSAs, you typically lose any amount you’ve contributed if you haven’t spent it by the end of the year. While contributing up to the maximum can reduce your taxable salary, this won’t help you much if you end up losing that money.

 

Method 3: Taking Applicable Credits and Deductions

 

Compare the standard deduction to itemized deductions. The Tax Cuts and Jobs Act of 2018 increased the standard deduction while eliminating a number of itemized deductions. Even if you’ve always itemized in the past, you might be able to reduce your taxes by taking the standard deduction.[9]

·       For 2018, the standard deduction is $12,000 for individuals, $18,000 for head of household, and $24,000 for married couples filing jointly.

·       Generally, you may benefit from itemizing your deductions if you had significant uninsured medical expenses, paid interest or taxes on a home that you owned, or had large losses following a federally declared disaster.[10]

Tip: If you use tax preparation software, such as TurboTax, the software will determine whether you would benefit the most from itemizing your deductions or taking the standard deduction based on your answers to a few simple questions.

 

Deduct your student loan interest if you are paying back student loans. Student loan interest is deductible regardless of whether you itemize your deductions or take the standard deduction. This deduction reduces the amount of your income that is taxable.[11]

·       As of 2019, you may deduct the amount of interest you paid over the year on your student loans, up to a maximum of $2,500.[12]

 

Tip: You can deduct student loan interest even if someone else, such as a parent or other relative, is paying your student loans on your behalf.

 

Figure out if you qualify for the Earned Income Tax Credit (EITC). The EITC provides a tax break for working individuals and couples with low to moderate incomes. Generally, you must earn income either from working for someone else or through self-employment, as well as meet other rules. Most taxpayers who qualify for the EITC have at least one child.[13]

·       You can use the IRS’s EITC Assistant, available online at https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant, to determine if you qualify for the EITC.

 

Take the child tax credit if you have children. The child tax credit is a refundable tax credit of $2,000 for each child you have who is under the age of 17. You qualify for this credit if you make less than $200,000 as an individual, or $400,000 if you are married and filing jointly.[14][15]

·       Because this tax credit is refundable, you can get up to $1400 back per child, even if your tax bill was already zero.

 

Tip: Each child you claim the child tax credit for must have a valid Social Security number.

 

Get an additional credit for any other dependents. If you have a child over the age of 17 for whom you cover at least half of their living expenses, you can still claim a $500 tax credit for them, even if they’re too old to qualify for the child tax credit.[16]

·       You can also get this credit for others who live with you and are dependent on you for care, such as an older relative or a disabled person.

·       You cannot claim either the dependent credit or the child tax credit if someone else claims that person as a dependent.

 

Claim a credit for installing renewable energy equipment in your home. If you own your home and want to convert some or all of your utilities to renewable energy, you may qualify for a tax credit worth a percentage of the cost of the system you install. Products covered include fuel cells, small wind turbines, geothermal heat pumps, and solar energy systems. While rental homes do not qualify, primary and secondary homes do, as well as new builds. The tax credit is gradually reduced each year until they are phased out in 2021:[17]

·       30% for systems placed in service by December 31, 2019;

·       26% for systems placed in service after December 31, 2019, but before January 1, 2021; and

·       22% for systems placed in service after December 31, 2020, but before January 1, 2022.

 

References:

1. ↑https://www.irs.gov/retirement-plans/401k-plans-deferrals-and-matching-when-compensation-exceeds-the-annual-limit
2. ↑Alex Kwan. Certified Public Accountant. Expert Interview. 23 April 2021.
3. ↑https://www.irs.gov/retirement-plans/irc-457b-deferred-compensation-plans
4. ↑https://www.investopedia.com/articles/retirement/05/022105.asp
5. ↑Alex Kwan. Certified Public Accountant. Expert Interview. 23 April 2021.
6. ↑https://www.hrblock.com/tax-center/healthcare/health-savings-flexible-spending-accounts/
7. ↑https://www.hrblock.com/tax-center/healthcare/health-savings-flexible-spending-accounts/
8. ↑https://www.hrblock.com/tax-center/healthcare/health-savings-flexible-spending-accounts/
9. ↑https://www.usa.gov/tax-benefits
10. ↑https://www.irs.gov/taxtopics/tc501
11. ↑https://www.usa.gov/tax-benefits
12. ↑https://www.irs.gov/taxtopics/tc456
13. ↑https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit
14. ↑https://www.usa.gov/tax-benefits
15. ↑Alex Kwan. Certified Public Accountant. Expert Interview. 23 April 2021.
16. ↑https://www.usa.gov/tax-benefits
17. ↑https://www.energystar.gov/about/federal_tax_credits/2017_renewable_energy_tax_credits
18. ↑https://turbotax.intuit.com/tax-tips/fun-facts/the-10-most-overlooked-tax-deductions/L2WjmvZAH

The post How to Reduce Your Taxes on Salary Income appeared first on Flex Tax and Consulting Group (FTCG).

]]> 4230 Nonresident Aliens and The Section 121 Principal Resident Exclusion https://flextcg.com/nonresident-aliens-and-the-section-121-principal-resident-exclusion/ Thu, 09 Jul 2020 20:35:37 +0000 https://flextcg.com/?p=3761 Internal Revenue Code § 121 provides taxpayers with an income tax exclusion from the gain of taxpayer selling a primary residence. The exclusion amount for a single up to $250,000 and married couples will raise to $500,000. To qualify for the exclusion, the taxpayer-owned and used the property as the taxpayer’s principal residence for periods […]

The post Nonresident Aliens and The Section 121 Principal Resident Exclusion appeared first on Flex Tax and Consulting Group (FTCG).

]]> Internal Revenue Code § 121 provides taxpayers with an income tax exclusion from the gain of taxpayer selling a primary residence. The exclusion amount for a single up to $250,000 and married couples will raise to $500,000. To qualify for the exclusion, the taxpayer-owned and used the property as the taxpayer’s principal residence for periods aggregating two years or more during the 5-year period ending on the date of the property sale or exchange. Determining the primary residence is a matter of fact and circumstances. For example, when a taxpayer rotates between two different residences, only one will be regarded as the primary residence based on a variety of factors, including but not limited to the time spent in the residence, workplace, and residence of other family members, etc. The address listed on the tax return, the address listed on the driver’s license, the mailing address for bills and letters, the location of the bank, and the religious organization’s location.

Non-resident foreigners can also apply this exclusion. However, because non-resident aliens are not eligible to submit a joint return, each person designated as a non-resident alien needs to share its share of the national resident exclusion tax in a separate tax return. In practice, this means that if the sale proceeds exceed $250,000, each filer will need to 1) be eligible to apply for the exemption of the primary residence on their own, and 2) file Form 1040NR U.S. Nonresident Alien Income Tax Return and state the ownership share of the principal residence.

According to the ” Foreign Investment in Real Property Tax Act ” (“FIRPTA”), non-resident foreigners should also pay additional tax other. For primary residences where the realized amount of sale (usually the sale price) is less than $300,000, no withholding is required; for sales between $300,000 and $1,000,000, the withholding tax rate is 10%; if the sales exceed $1,000,000, The withholding rate is 15%. Non-resident foreign taxpayers may find themselves eligible to claim the exclusion of the primary residence stipulated in IRC § 121, so FIRPTA withholding taxes will exceed his/her highest tax liability in the transaction. In this case, the taxpayer can request the US Internal Revenue Service to provide proof of withholding tax to the buyer, indicating that the withholding tax rate they owe is low or not at all. Since the primary residence exclusion in IRC § 121 does not constitute a non-recognition provision within the meaning of FIRPTA (non-recognition provision makes FIRPTA not applicable at all), unless the purchaser obtains a withholding certificate, the buyer must withhold the appropriate tax rate.

Tax treatment for gain from sale of principal residence can be tricky. We are here to help you. Don’t hesitate to call our office:415-860-6288 (San Francisco), 917-397-0949 (New York) and 713-396-0107 (Houston), and e-mail us at info@flextcg.com.

The post Nonresident Aliens and The Section 121 Principal Resident Exclusion appeared first on Flex Tax and Consulting Group (FTCG).

]]> 3761 TAX RELIEF FOR INDIVIDUALS: CONSIDER CHANGING 2019 OVERPAYMENT FROM A CARRYFORWARD TO A REFUND https://flextcg.com/tax-relief-for-individuals-consider-changing-2019-overpayment-from-a-carryforward-to-a-refund/ Thu, 04 Jun 2020 04:48:30 +0000 https://flextcg.com/?p=3589 Since the CARES Act passed, there has been a lot of talk about getting funding to businesses to help the economy. Businesses received some relief through Payroll Protection Program loans, Economic Injury Disaster Loans (EIDL),-Employee Retention Credits and an increase in the allowable business interest deduction limit, to name a few. But what about the […]

The post TAX RELIEF FOR INDIVIDUALS: CONSIDER CHANGING 2019 OVERPAYMENT FROM A CARRYFORWARD TO A REFUND appeared first on Flex Tax and Consulting Group (FTCG).

]]> Since the CARES Act passed, there has been a lot of talk about getting funding to businesses to help the economy. Businesses received some relief through Payroll Protection Program loans, Economic Injury Disaster Loans (EIDL),-Employee Retention Credits and an increase in the allowable business interest deduction limit, to name a few.

But what about the individuals? The most noted benefit that individual filers received was the Economic Impact Payment, which depended on adjusted gross income thresholds. Those who lost their jobs or had work hours reduced could apply for unemployment benefits or Pandemic Unemployment Assistance. With millions of people collecting unemployment and unsure what their cash flow might look like in the future, this may not be enough. The good news is there may be another way for individuals to get their hands on some much-needed cash.

Taxpayers who have already filed 2019 individual income tax returns reflecting an overpayment applied to 2020 may elect (retroactively) to receive this overpayment as a refund instead. Pursuant to a 1977 Revenue Ruling, this process is relatively simple. There is no need to file an amended return for 2019, but rather a “Superseded Return.” When filing the superseded return, simply indicate that the overpayment should be refunded instead of carried forward. The superseded return will replace the original 2019 return.

There are a couple things to note. Most importantly, the superseded return needs to be filed before the original due date for your 2019 return. The original due date for filing 2019 individual income tax returns is July 15, 2020 (extended from April 15, 2020 under the CARES Act). Superseded returns must be paper filed and mailed to the appropriate IRS processing center. (The mailing address can be found within the Form 1040 filing instructions.) As with most returns that are paper filed, processing could be delayed; however, providing banking information on the return will speed up the payment by four to six weeks.

For questions about filing a superseded return or receiving a refund of your tax overpayment, contact your Flex Tax tax advisor.

The post TAX RELIEF FOR INDIVIDUALS: CONSIDER CHANGING 2019 OVERPAYMENT FROM A CARRYFORWARD TO A REFUND appeared first on Flex Tax and Consulting Group (FTCG).

]]> 3589