Yes. There's a big thing you've got to do!
You need to go get the document that the check came with and search it for "Withholding". You need to know if they withheld taxes for State and Federal. Commonly, on a stock option execution like this, they do a flat 25% withholding. But you need to know for sure.
Do a "dry run" on your taxes to spot big problems
And if everything I say below is "blah blah Ginger" to you, then talk to your tax advisor. If your tax advisor is TurboTax, take it to a better tax advisor.
We're not doing fine numbers here, so you can just use 2018 forms and instructions. Our goal here is to figure coarsely what your ultimate taxes will be, and see if enough money has been withheld; and if not, correct that.
I'd expect it to go pretty quick with the new Trump postcard forms, the main thing that's new is figuring out the correct tax treatment (category) for the lump sum.
Remember: Don't put the value of the check you got as income -- you have to use the "gross income" and "withholding" numbers off the paperwork that came with the check. So for instance if the check was $100,000, the gross income was $135,000 and the Fed withholding was $30,000 and state $5000, you have to use the $135,000 number on the "income" side of your 1040.
For your regular salary, use last year's if you don't expect it to change much, or if you know how much it changed by percentage, just fudge upward all the numbers: gross income, tax withheld etc. We are not after perfection today.
Finally at the bottom of this "straw 1040" you'll have "Tax." And "Taxes withheld" (both from salary and from this big cash-out). What's the difference? Will you owe money or be owed a refund?
- If you're owed a refund, don't worry about it.
- If you're owed a HUGE refund, ask another question about adjusting your withholding.
- If you owe less than, say, about 5%, don't worry about it.
- If you owe more than 5%, then whatever that difference is that we came up with in our rough draft here, you should make an estimated tax payment. You do those on Form 1040-ES.
This isn't precision work here; we're using last years' forms for Pete's sake; we only need to get in the ballpark.
If you owe enough to the Feds to justify sending a check, then you should do the same above procedure for State (or county/city) taxes, because you may owe them estimated payments also.
IRS requires that you pay your taxes throughout the year roughly when you earn them. For instance I got a huge windfall in December, and I made an estimated tax payment in December. They were satisfied by that because the income came in December. When you fail to do that, and pay a large fraction of your taxes on April 15, they have penalties for that.
Remember, in 2020 when actually filing your 2019 taxes, to include this estimated tax payment inside your "withholding and payments" area of your tax form. If you mess this up, IRS will fix it for you.