I recently enrolled in my company's employee stock purchase plan (ESPP) with the maximum-allowed 10% of my salary. I get the stock at a 15% discount relative to the purchase date (no look-back provision anymore unfortunately). I understand the tax issues concerning ESPPs are very complicated but I am planning to sell my shares immediately and pay normal income tax rates on the profit, so that simplifies things. It should be roughly a 1.5% bonus (10% of income * 15% discount), which is not insignificant.
My question is, will my employer withhold taxes on the amount of the discount (which is always taxed at normal income rates if I understand correctly)? If not is it possible I would end up owing too much in taxes and get hit with an underpayment penalty? I keep my withholding exemptions at 0 but I also got $5K in consulting income this year with no withholding. I didn't bother paying estimated taxes because I have a $5K deduction to mostly cancel that out.