If you receive stock that vests over time, the tax law's default is to treat the stock as income as it vests — at whatever it's worth then. A Section 83(b) election lets you choose to include its value in income at the time you receive it instead.
Why founders file it
At formation, founder stock is often worth very little. Electing under 83(b) means recognizing income on that low value up front, rather than on a potentially much higher value as shares vest later. It can also start the capital gains holding period earlier. Whether it makes sense for you is a tax question to confirm with your tax advisor.
The deadline: 30 days, no extensions
The election must be filed with the IRS no later than 30 days after the date the property is transferred to you. If the 30th day falls on a Saturday, Sunday, or legal holiday, it's timely if postmarked by the next business day. There's no general way to fix a missed deadline, which is why it's one of the most important dates in a founder's first month.
How to file
- Use IRS Form 15620 (Section 83(b) Election), or a written statement that meets the Treasury regulation requirements.
- File with the IRS office where you file your federal income tax return. The IRS also offers online submission of Form 15620 through its mobile-friendly forms.
- Give a copy to the company (the person for whom you perform services).
- Keep proof of timely filing — a certified-mail receipt or the online confirmation.
What can go wrong
- Missing the deadline. Count from the transfer date, not the date you remember to do it.
- Wrong values. The election reports the fair market value and the amount paid; get these from the company's documents.
- Forfeiture. If you file and later forfeit the shares, the Code generally doesn't allow a deduction for that forfeiture.
- No proof. Investors' counsel commonly asks for evidence the election was filed.