Tax Projection: How One Founder Found the Gap Before December

Tax Projection: How One Founder Found the Gap Before December

A tax projection is a rough forecast of this year's full tax bill, built from income so far plus what you expect to earn by December. In October, there is still time to act on it. In April, there is only time to pay.

Illustrative anonymized composite, drawn from recurring patterns rather than a single engagement. The firm named below was not involved in it. The person, employer and every dollar figure are invented and rounded. Nothing here is guaranteed or predictive.

The founder in this composite earns a startup salary, receives quarterly RSU vests, and consults on the side. Every paycheck showed tax withheld, so the founder assumed the year was covered.

A firm that works with people in this position is Doug Johnson CPA, a Los Angeles firm that lists equity compensation among its specialties and is covered near the end, after the story. Doug Johnson CPA is a paid featured member of Sam's List.

Why a Tax Projection in October Beats a Surprise in April

The composite founder asked a CPA for a projection after the third RSU vest, with one vest and a year-end bonus still to come. The method: add income to date to expected vests, bonus and consulting, estimate the full-year tax, and subtract what is already paid. What remains is the gap.

The limitation: a projection is only as good as its inputs. Share prices, bonuses and invoices move, so treat the output as a range.

RSU Supplemental Withholding: Why the Flat Rate Left a Gap

When RSUs vest, the shares are generally taxed as wages. Employers commonly withhold federal income tax on that amount at the flat supplemental rate, which is 22% for supplemental wages up to $1 million in a year. Above that, a higher mandatory rate generally applies.

Withholding is a method, not your tax rate. Your bracket on the whole return sets the actual tax. Here, the founder's rounded marginal rate was 35%, so each vest was under-withheld by about 13 points, and the consulting income had no withholding at all.

Income source	Projected for the year	Federal income tax withheld
Salary	$180,000	$42,000
Year-end bonus	$20,000	$4,400 (22%)
RSU vests ($90,000 to date plus $30,000 in November)	$120,000	$26,400 (22%)
Consulting, net of expenses	$40,000	$0
Total	$360,000	$72,800

The CPA projected total federal tax of $90,000, rounded, covering income, self-employment and additional Medicare tax. Against $72,800 withheld, the projected balance due was $17,200.

The limitation: the flat rate is a default, not an error. It fits lower brackets well and a high bracket badly, and the employer cannot see your other income.

The Estimated Tax Underpayment Penalty: What the Safe Harbors Showed

The estimated tax underpayment penalty is separate from the bill at filing. Under IRC section 6654, a taxpayer generally owes it when too little tax is paid in during the year, even if the balance is paid by April.

Generally, you avoid it by paying in at least the lesser of 90% of this year's tax or 100% of last year's tax, rising to 110% if last year's adjusted gross income was above $150,000. In the composite, last year's tax was $75,000, on income above that line.

Safe harbor test	Required payments	Projected withholding for the year	Shortfall
90% of projected 2026 tax ($90,000)	$81,000	$72,800	$8,200
110% of prior-year tax ($75,000)	$82,500	$72,800	$9,700
Lesser of the two	$81,000	$72,800	$8,200

So the founder needed another $8,200 paid in to avoid the penalty, not the full $17,200. The remaining $9,000 would be a bill at filing, but not a penalty.

The limitation: the safe harbor percentages and the $150,000 threshold are set by law and can change. Check the current-year rules before relying on any figure here.

Three Ways to Close the Tax Projection Gap Before December

Raise W-4 withholding for the rest of the year. Withholding is generally treated as paid evenly across the year, whenever it is withheld. Adding $8,200 over six pay periods, about $1,370 each, could cover the earlier quarters too.

Make a fourth-quarter estimated payment. Estimated payments count on the date made, and the final 2026 installment is generally due January 15, 2027. That helps the last quarter only.

Ask whether the annualized income method applies. Form 2210 includes a method that can lower the penalty when income arrived unevenly, as vests do. It does not reduce the tax itself.

The limitation: more withholding is the cleanest fix, but it shrinks paychecks when year-end bills arrive. The annualized method needs records of when income was received.

What the Tax Projection Changed, and What It Did Not

The founder chose to raise withholding and set aside the remaining $9,000 for April. That was a choice, not a rule.

The projection reduced the surprise. It did not eliminate the bill. A lower share price would narrow the gap, and a bigger bonus could widen it. The CPA suggested rerunning the projection after the November vest, since each rerun replaces guesses with actuals.

The limitation: no projection protects against a rule change or a mistake in the inputs.

Where Doug Johnson CPA Fits

Doug Johnson CPA is based in Los Angeles, was founded in 2024 and has 3 employees, including the owner. It serves clients nationwide, lists equity compensation among its specialties, and states minimums of $250K income and $250K revenue. It did not work with the founder in this composite, and nothing above describes its results.

Doug Johnson CPA has 15 verified client reviews on Sam's List as of 2026-10-02. Each review is submitted by an individual who identifies as a client of the firm and rates it on communication, subject-matter knowledge, and overall satisfaction. Reviews reflect those individual experiences and do not represent an endorsement by Sam's List. Doug Johnson CPA is a paid featured member of Sam's List. Ratings and rankings are not indicative of future performance or results.

The limitation, plainly: the profile does not say whether projections, W-4 guidance or Form 2210 work are included, or how they are priced. Ask, and ask how often the projection is updated.

Frequently Asked Questions

What is a tax projection and when should I get one?

A tax projection estimates your full-year tax from income to date plus expected income, then compares it with what you have paid. It is most useful in the third or fourth quarter, while you can still adjust withholding.

Is RSU supplemental withholding enough to cover my taxes?

Often not. Employers commonly withhold a flat 22% on supplemental wages up to $1 million, but your real bracket may be higher, such as 32% or 35%. Compare your projected tax with total withholding before year-end.

How do I avoid the estimated tax underpayment penalty?

Generally, pay in at least the lesser of 90% of this year's tax or 100% of last year's tax, or 110% if last year's adjusted gross income exceeded $150,000. Withholding counts as paid evenly, so raising it late can help.

Can I fix an underpayment in December?

Sometimes. Extra W-4 withholding is generally treated as paid evenly, so it can cover earlier quarters. A late estimated payment usually cannot. The annualized income method may help if income arrived late. Nothing is guaranteed.

If you have RSU vests or bonus income and have not compared your withholding with your expected tax, pull your latest pay stubs this week and ask a CPA for a projection. You can browse accountants on Sam's List, including the firm above.

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About the author: Kimberly Green is cofounder of Sam’s List, a directory and matching platform for financial professionals.