Updated July 28, 2026. Quick answer: Double-trigger RSUs need both a time vest and a liquidity event. At IPO the second trigger fires for everything already time-vested at once, so several years of income can land in a single tax year.
Two conditions, one very large day
In a private company the time condition keeps being satisfied quietly while the liquidity condition holds everything back. When the liquidity event occurs, all of it becomes taxable together — ordinary income, on your W-2, in one year.
Why the bill is worse than the headline
Three effects compound. The stacked income can push you into a materially higher bracket than any single year would have. Flat supplemental withholding at 22% is far below that bracket, so the shortfall is proportionally larger. And a lockup often prevents you selling shares to pay the bill you just incurred.
The lockup point is the one that causes real damage: you can owe tax at the IPO-day price and be unable to sell until months later, at whatever price exists then. The tax does not adjust downward if the stock falls.
What is actually decidable in advance
Not much about the trigger itself — but the size of the withholding gap is knowable, and so is whether you have cash outside the position to cover it. Those are the two questions worth answering before the event rather than after.
Withholding at IPO is usually share-settled
Most companies satisfy withholding by holding back shares rather than asking for cash. That is convenient, but it withholds at the flat supplemental rate, which is the same rate that is too low for most people in this position. Share-settled withholding does not solve the gap; it just makes it invisible until filing.
The two prices that matter
Your income is fixed at the value when the second trigger fires. Your proceeds depend on the price when you can actually sell. In a falling market after a lockup those two numbers diverge badly, and the tax is computed on the first one.
Sources
IRC §83(a); IRC §3402(g)(1)(A); Treas. Reg. §31.3402(g)-1.
This states what the cited authority says. It is not tax advice, and equity compensation interacts with the rest of your return in ways a single page cannot see.