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Advanced Planning: Employees nearing retirement should work with financial advisors to understand the tax implications of their RSUs and develop a strategy to manage the associated liabilities. Enhanced Payroll Systems: Employers should ensure their payroll systems are capable of handling the complexities of RSU taxation, including the correct calculation and timely remittance of FICA taxes. This unique scenario is rarely discussed with payroll technology vendors, so it’s imperative the employer understands the capabilities necessary to ensure compliance can be achieved. The taxation of RSUs vesting before retirement presents unique challenges, particularly in the context of FICA taxes. Both employers and employees must navigate timing, cash flow, and compliance issues to ensure that tax obligations are met without undue hardship. By understanding these complexities and planning accordingly, stakeholders can mitigate the potential pitfalls and maximize the benefits of RSU compensation.
Employees nearing retirement should work with financial advisors to understand the tax implications of their RSUs and develop a strategy to manage the associated liabilities.
Mitigating the Challenges To address these issues, employers and employees can take several proactive steps: Education and Communication: Employers must educate employees about the taxation of RSUs, emphasizing the timing of FICA tax liability and the potential cash flow implications. Flexible Payment Options: Employers can provide options for employees to cover their FICA tax liabilities, such as selling a portion of the vested shares or making direct payments. It’s important to refer to your organization’s equity plan document to ensure payment options are eligible and are aligned to the plan governance.
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GLOBAL PAYROLL MAGAZINE ISSUE 9
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