Two Ways to Cover an RSU Tax Shortfall. The IRS Doesn't Treat Them the Same.

Both cover the shortfall. Only one changes the timing. The IRS credits wage withholding as one-fourth paid on each of the four payment due dates, per the Instructions for Form 2210, so raising a W-4 now can reach backward. A January 15 estimated payment counts only when paid.

Two levers, and they are not interchangeable

First, increase withholding on the paychecks left in the year by filing a new Form W-4 with the extra-withholding line filled in. Second, send a fourth-quarter estimated payment.

Both get the money to the IRS. They do not land on the same date as far as the penalty calculation is concerned, and that is the entire difference between them.

For now, forget the dollar amount of the shortfall. Assume it is the same number either way. What changes is which payment period the dollars get credited to.

The mechanic: withheld dollars get spread, estimated payments do not

Federal income tax withheld from wages is not credited on the day it left the paycheck. The IRS Instructions for Form 2210 state it directly: "you are considered to have paid one-fourth of these amounts on each payment due date unless you can show otherwise."

Read that against a vest. If a block vested in May and the withholding at vest came up short, dollars withheld from a November paycheck are still treated as one-fourth arriving on each of the four due dates, including the April and June ones that already passed. That is what reaches back at the second-period underpayment.

An estimated payment does not behave that way. Money sent on January 15 is credited on January 15. It covers the fourth period. It does not repair an underpayment sitting in the second period, so the penalty clock that started running back in June keeps running.

Keep in mind the ratable treatment is a default, not a cage. The same instructions let a taxpayer treat withholding as paid on the dates it was actually withheld, which means checking box D in Part II and attaching Form 2210 to the return. That election helps someone whose withholding was front-loaded. It works against someone deliberately loading withholding into the last four months, which is the situation this post is about.

Side by side

Figures: IRS Instructions for Form 2210 (tax year 2025 revision) and IRS Topic no. 306, Penalty for underpayment of estimated tax (page last reviewed March 31, 2026). Payment period schedule: IRS pay-as-you-go withholding and estimated tax guidance (page last reviewed November 14, 2025).

	Increase W-4 withholding on remaining paychecks	Fourth-quarter estimated tax payment
How the IRS credits the timing	One-fourth treated as paid on each of the four payment due dates, regardless of the date actually withheld (Instructions for Form 2210, TY2025).	Credited in the period actually paid. No spreading.
Effect on an earlier-quarter underpayment	Reaches backward. Can reduce or remove exposure in periods that already closed.	None. Fixes the fourth period only.
Deadline	The final payroll run of the calendar year. Every pay period that passes removes one more chance to route dollars through it.	January 15 of the following year, covering income earned September 1 through December 31 (IRS pay-as-you-go guidance, 2025).
Mechanism	New Form W-4 to the employer, using the extra-withholding line. Capped by what is left in the remaining paychecks.	Form 1040-ES or a direct payment through an IRS online account. No cap.
If income is uneven across the year	The annualized income installment method on Schedule AI may change the required installment for each period, which changes how much this needs to cover.	Same. The IRS allows unequal payments under the annualized method when income is received unevenly (Topic no. 306, 2026).
Counts toward the same safe harbors	Yes for both. 90% of current-year tax, or 100% of prior-year tax, whichever is smaller, and 110% instead of 100% where prior-year AGI exceeded $150,000 ($75,000 married filing separately).

The safe-harbor numbers

Two figures do most of the work. First, 90% of the tax for the current year. Second, 100% of the tax shown on the prior year's return, whichever of the two is smaller, per IRS Topic no. 306 (page last reviewed March 31, 2026).

For a high earner the second figure moves. The Instructions for Form 2210 substitute 110% for 100% when prior-year AGI was more than $150,000, or $75,000 for married filing separately. On a year with a large vest, that 110% of a big prior year can be the harder target of the two, which is worth checking rather than assuming.

There is also a floor. Topic no. 306 says most taxpayers avoid the penalty if they owe less than $1,000 in tax after subtracting withholding and refundable credits. A shortfall that lands under that line is a different conversation than one that does not.

Where your own facts change the answer

Three places, and each of them is a question for a CPA rather than something to settle from a blog post.

First, whether the shortfall is actually a shortfall. The flat supplemental rate an employer applies at vest can be well below a marginal rate on a large equity year, and it can also be roughly right. Confirm the number before solving for it. If the timing of vests is the part that is unclear, the vesting-window framework covers how to map them out.

Second, the state side. California does not run on the federal safe-harbor rules, and a federal fix does nothing for a state balance. How California taxes RSU vesting is the starting point, and the state estimated-payment schedule is its own item to evaluate with a tax professional.

Third, whether the paycheck can carry it. Increasing withholding only works to the extent there is remaining pay to withhold from. Someone whose compensation is heavily weighted to equity may not have enough W-2 runway left in the year to cover the gap, in which case the estimated payment stops being optional and the annualized method becomes the thing to look at. Equity concentration and cash-flow sequencing are the pieces the San Diego H.E.N.R.Y. strategy is built around, and they change what either lever can realistically do.

Why late August is the point where this is worth looking at

There are roughly four months of paychecks left. That is the whole inventory of dollars that can be routed through the ratable-withholding treatment this year, and it gets smaller every pay period. It is not an emergency. It is just a lever with a shrinking amount of travel left in it.

I use a flying comparison for this. A pilot corrects course constantly, because a deviation of a single degree does not look like much on the instrument panel but puts the aircraft hundreds of miles off target by the end of a long flight. A withholding rate that is slightly wrong behaves the same way. Caught in August it is a payroll adjustment. Caught in April it is a bill plus a penalty calculation.

A short checklist to bring to a CPA

• Confirm the actual federal withholding taken at each vest this year against the marginal rate, rather than assuming the supplemental rate was close.
• Evaluate which safe harbor is the easier target, 90% of current-year tax or 110% of prior-year tax, given prior-year AGI above $150,000.
• Confirm how many pay periods are left and what the maximum extra withholding per period would be.
• Evaluate whether the annualized income installment method on Schedule AI produces a lower required installment for the periods when the vests landed.
• Confirm whether the box D election, treating withholding as paid when actually withheld, helps or hurts given when the withholding occurred.
• Confirm the California estimated-payment position separately from the federal one.

Frequently asked questions

Does increasing W-4 withholding now fix an underpayment from a vest earlier in the year?

It can. The Instructions for Form 2210 treat withheld federal income tax as one-fourth paid on each of the four payment due dates unless the taxpayer shows otherwise, so dollars withheld in the fall are credited against earlier periods as well. A fourth-quarter estimated payment is credited in the period actually paid and does not reach back.

When is the fourth-quarter estimated tax payment due?

January 15 of the following year, covering income earned September 1 through December 31, per IRS pay-as-you-go guidance. If that date falls on a Saturday, Sunday, or legal holiday, the payment is due the next business day.

What is the safe harbor for a high earner?

IRS Topic no. 306 describes the general rule as 90% of the tax for the current year or 100% of the tax shown on the prior year's return, whichever is smaller. The Instructions for Form 2210 substitute 110% for 100% when prior-year adjusted gross income was more than $150,000, or $75,000 for married filing separately.

Can withholding be counted on the date it was actually withheld instead?

Yes. The Instructions for Form 2210 allow a taxpayer to treat withholding as paid on the dates it was actually withheld, which requires checking box D in Part II and attaching Form 2210 to the return. That election tends to help when withholding was front-loaded early in the year and to hurt when it is being loaded into the final months.

Does any of this cover the California balance?

No. These are federal rules. California runs its own estimated-payment requirements and its own schedule, and a federal fix does nothing for a state balance. Confirm the state position separately with a CPA.

If you want a second set of eyes on the sequencing

BAS Financial is not a CPA firm, and the return is the CPA's call. What we can look at is the sequencing around it: how many pay periods are left, what the remaining vests do to the current-year number, and how that fits the rest of the plan for an equity-heavy income. That work sits inside the San Diego H.E.N.R.Y. strategy, and fee is discussed during a complimentary review.

Want to put twenty minutes on the calendar and walk through the vest schedule?

Sources: IRS, Instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts (2025 revision). IRS, Topic no. 306, Penalty for underpayment of estimated tax (page last reviewed March 31, 2026). IRS, Pay as you go, so you won't owe: A guide to withholding, estimated taxes and ways to avoid the estimated tax penalty (page last reviewed November 14, 2025). Figures reflect the tax years stated and should be confirmed against the current-year guidance with a tax professional.