What Is 83(b) Election And How To File It Online
What Is an 83(b) Election?
When you receive shares subject to vesting, the IRS default rule is that you get taxed each time a portion vests, based on the fair market value at that point. If your company grows, those shares could be worth significantly more by vesting time, and you would owe taxes on that higher value as ordinary income.
An 83(b) election is a notice you send to the IRS that says: “I want to be taxed on the full value of my shares right now, not later as they vest.” Because most founders receive their shares when the company is brand new and the share price is nearly zero, this typically results in little to no tax at the time of filing. When you eventually sell your shares, any profit is taxed as a capital gain rather than ordinary income, and you may qualify for long-term capital gains rates if you hold the shares for more than a year from the grant date.
In short, filing an 83(b) election is one of the most important tax moves a founder can make, and missing the deadline means you can’t go back.
Who Should File?
The election applies to U.S. taxpayers who receive shares subject to a substantial risk of forfeiture, meaning the shares can be taken back if you leave. This most commonly applies to founders on a vesting schedule.
The 30-Day Deadline
This is where many people make mistakes. You have exactly 30 days from the date you received the shares to file the election. There are no extensions and no exceptions. If you miss it, the opportunity is gone. The clock starts on the date the property is transferred.
What You Need to File
Before you start, gather the following:
- Your name, address, and SSN or ITIN
- Your employer’s name, address, and EIN
- A description of the shares (number and class)
- The date you received the shares and the taxable year
- The nature of the restriction (your vesting schedule)
- The fair market value of the shares at the time of the grant
- The amount you paid for the shares, if anything
How to File
There are two ways to submit: online or by mail. Use only one method, not both. But do it in the same 30-day window.
Online (available if you have an SSN or ITIN)
This is now the IRS-preferred method. Go to the IRS website, create or sign in to your IRS account, find Form 15620 (Section 83(b) Election), and complete the form. Once submitted, download and save your confirmation immediately. This is your proof of filing.
By mail (available to everyone, including non-U.S. founders)
Print and sign Form 15620. Send it by certified mail with return receipt requested to the IRS service center where you file your annual tax return. The postmark date is what counts for the deadline, so use a trackable method and keep the receipt.
If you need help, Skala can assist with preparing and filing your 83(b) election. Send your application here.
What Happens If You Do Not File?
If you miss the 30-day window, your shares will be taxed as ordinary income each time a portion vests, based on fair market value at that point. For a fast-growing startup, this can create a significant and sometimes unexpected tax bill at each vesting date, even if you have not sold any shares and have no cash on hand to pay the taxes.
