LR RSU and ESPP Taxation: Forget the Big Payout

Check these out on your own. If you think it is worth staying because of a massive payout, think again.

---> Expect ~40% to disappear instantly via "sell-to-cover" on the day the RSUs vest.

----> Anticipate an additional tax bill of roughly $20 to $33 for every $1,000 of gross RSUs vested.

Choose your future wisely. Go look this crud up yourself.

Posting because people say "kick back and let everything just increase with RSUs and ESPP". RESEARCH THESE YOURSELF.

Bullet points...

Under Cisco’s standard severance agreements, Cisco typically accelerates the vesting of RSUs that would have vested through a specific forward date (often the next major vesting milestone or up to a few months out).

The True Tax Cost: 25% to 50%+ (Based on your total annual income)
When these accelerated RSUs vest on your termination date, they are treated exactly like a cash bonus (supplemental ordinary income). You are taxed on the Fair Market Value (FMV) of the stock on the day it vests.

Because the federal government mandates a flat 22% withholding for RSUs, you will likely owe extra tax at April filing time if your total annual income puts you in the 24%, 32%, 35%, or 37% federal tax brackets.

Employee Stock Purchase Plan (ESPP)

Option A: Disqualifying Disposition (Held 2 years from offer start AND > 1 year from purchase date)

If you have held the shares past both milestones:

Ordinary Income Tax Rate (12% to 37%): You pay ordinary income tax only on the lesser of: the actual profit, or the 15% discount based on the stock price at the start of the offering period.

Long-Term Capital Gains Rate (0%, 15%, or 20%): All remaining profit is taxed at the much lower long-term capital gains rate. For most tech professionals, this rate is 15%.

#401K #Layoffs #Severance #Tax

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Amazing that people think high taxes for everybody else is great (and vote for more of it) until it applies to them.

@b9 thank you for the info. You can just ignore the noises from the trolling/combative bots.

I would estimate the tax hit of a severance package at the 32% federal, top marginal state income tax (if applicable), and 2.5% medicare.

The effective federal and state tax will usually be lower, and hopefully you will get a refund by next April (and avoid under-witholding penalty from IRS)

You've described the American tax system. So? This applies to other employers too.

The simple purpose of this post is to help others, deciding on staying or looking for something else, to make an informed decision. I stayed, in part, for the LR package, and the RSUs and ESPP potential gains. I was taken aback a bit by the taxes. Was it worth it? Only the person making the decision can decide that. I am just passing along the fact that people need to make sure they fully understand the tax implications, and the potential that what ends up in their pocket will be most likely much less than expected. Moreover, to message that it may be unwise to be lulled into staying by including future RSU payouts that will never materialize because they are beyond the LR vesting extra-allowance. If you want to take a dig at someone trying to provide knowledge based on my own past experience, well I guess that is a reflection of your own perhaps more critical ideologies.

Seriously, what's your point other than crying and stirring the pot? Nothing changed as far as what happens to options and stock. If someone has that big of a problem with with the options, give them back or donate them. Otherwise, there's always tax implications. Would you rather NOT have the stock and the issue and then get laid off?

Thread regarding Cisco Systems Inc. layoffs

LR RSU and ESPP Taxation: Forget the Big Payout

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