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Thirty days. That’s all the time you get to make one potentially important tax decision about your restricted stock.
A Section 83(b) election lets you choose to pay tax when you receive eligible restricted stock rather than as it vests, while also starting your capital gains holding period earlier. The catch? You must file IRS Form 15620 within 30 days of the transfer date, and missing the deadline generally means missing the election.
The IRS introduced Form 15620 in late 2024 to standardize the process, but the 30-day clock hasn’t changed. This guide explains who can make an 83(b) election, how to calculate your deadline, and how to file correctly online or by mail.
The 83(b) election is a provision under the US Internal Revenue Code (IRC) that gives you the opportunity to pay taxes on the total fair market value (FMV) of your stock options or restricted stock units at the time of grant, rather than when they vest.
This becomes particularly important when you consider a typical four-year vesting schedule, during which the value of your equity could increase significantly. By the time you can exercise your equity, you might owe higher taxes due to the increased value. However, some companies allow early exercise of equity, i.e., before it vests and while the value is still low, which could result in potential future tax savings.
In this case, you must submit a written statement to the Internal Revenue Service (IRS) within 30 days of the date of the stock grant to file an 83(b) election. The election is irrevocable and must be filed even if the stock is not transferable or subject to a substantial risk of forfeiture.
An 83(b) election applies to property transferred in connection with services that is subject to vesting or forfeiture. In plain terms, you need actual stock, not a promise of stock.
You can make a valid 83(b) election for these awards:
You cannot make a valid election for restricted stock units (RSUs) or unexercised options, because no property transfers at grant. For a deeper look at how these awards work, see our guide to understanding a stock option grant.
Suppose you are granted 1,000 options at a startup. The FMV of each share at the time of granting is $30.
The FMV of each share at the time of granting is $30. If you file an 83(b) election, you'll pay taxes on the total FMV of the stocks at the time of granting, which amounts to $30,000 (1,000 shares * $30 per share). If your tax rate is 37%, you'll owe $11,100 in taxes.
Fast forward to four years later, let's assume each share is now worth $100. Even though the total value of your stocks is now $100,000 (1,000 shares * $100 per share), you won't owe any additional taxes because you filed an 83(b) election. When you eventually sell the shares, you'll only owe capital gains tax on the difference between the $100 per share value at the time of sale and the $30 per share value that you were taxed on when you made the 83(b) election.
On the other hand, you only have to pay taxes when exercising your stock options (ISO/NSO) - taxed as ordinary income for NSO and at AMT rates for ISO. The tax is based on the difference between the exercise price (the price you pay to buy the shares) and the FMV at the time of exercise. If the stock price increases between the time the options are granted and the time you exercise them, you will owe more in taxes.
For instance (assuming NSO), if each share is worth $100 at the time you exercise your options four years after they were granted, but the exercise price is still $30 per share. The difference of $70 per share ($100 FMV - $30 exercise price) is taxed as ordinary income. In this scenario, with 1,000 shares and a 37% tax rate, you owe $25,900 in taxes.
Hence, by filing an 83(b) election at the time of grant when the FMV was lower, you could have saved around $14,800 in taxes.
For Restricted Stock Awards (RSAs), the taxation process is different. RSAs are taxed at the time of vesting, not at the time of grant or exercise. The taxable income is determined by the FMV of the shares at the time they vest. If the shares increase in value from the time of grant to the time of vesting, the taxable income will be higher.
The core reason founders file is timing. Filing early, when your stock's FMV is low, minimizes the ordinary income you recognize and shifts most of the future upside into capital gains territory. It also starts the clock on long-term capital gains treatment and, potentially, Qualified Small Business Stock (QSBS) benefits under Section 1202.
Without an election, you recognize ordinary income as shares vest, based on the FMV at each vesting date. When your company's value climbs, that means paying ordinary income tax on a rising number, year after year. With a timely election, you recognize income once, up front, and future appreciation after that point is capital gain.
The tradeoff is real. An 83(b) election is irrevocable, and the tax you pay is not refundable if the stock later loses value or you forfeit it.
The difference comes down to when you are taxed and at what value. Here is the side-by-side.
The key insight: without the election, your ordinary income baseline rises with the stock, so a fast-growing company can hand you a large ordinary tax bill at vesting.
The central risk is prepaying tax on equity that may never fully vest or may lose value. You file, recognize income at grant, and later leave before vesting or the company fails, and that tax does not come back.
You may be able to claim a capital loss when the stock becomes worthless or is disposed of, but capital losses are limited to $3,000 of net loss against ordinary income per year for individuals, with the rest carried forward (per IRS Topic No. 409 and IRS Publication 550). That is a slow, partial recovery at best. This is why the election makes the most sense when FMV at grant is very low.
Considering an 83(b) election is crucial for individuals in specific situations. Startup employees who receive equity compensation, especially those with restricted stocks subject to vesting, are ideal candidates for this election. Similarly, founders who receive company shares as part of their compensation package can also benefit from filing an 83(b) election to optimize their tax situation.
Opting for an 83(b) election offers a level of predictability in tax obligations. By paying taxes upfront, individuals can have a clearer understanding of their tax liability, aiding in long-term financial planning. Additionally, individuals with a relatively low income when they receive equity compensation may find filing an 83(b) election advantageous. This approach allows them to pay taxes based on the initial stock value, potentially avoiding higher taxes when the stock vests at a higher value.
The benefit of an 83(b) election is highly sensitive to FMV at grant. When stock is granted at pennies per share, as it often is for founders and very early employees, the income you recognize now is minimal while the future upside is large. That is the strongest possible case for filing.
For later-stage employees, FMV at grant is often already meaningful. Filing then can mean paying substantial ordinary tax now on stock that may not vest or may not hold its value. The risk-reward shifts, and many advisors find 83(b) less compelling unless growth expectations are very strong.
An 83(b) election only helps if the grant details, filing date, and supporting records stay easy to verify later. See how Qapita helps startups track grants and equity records in one place. Book a Demo.
Filing an 83(b) election can offer several advantages, especially when founders expect their company's value to appreciate significantly. Here are some of the main benefits:
While filing an 83(b) election can be beneficial, it's essential for you to be aware of the challenges that come with this tax strategy. You may face the challenge of having to pay taxes upfront on the FMV of the stock, regardless of whether its value decreases or if the stock is forfeited.
Once you make the election, you lose the flexibility to revoke it without obtaining consent from the IRS, adding a layer of permanence to your decision. There is also the potential challenge of Alternative Minimum Tax (AMT) implications, especially concerning incentive stock options, which could impact your tax liability.
You must file your 83(b) election no later than 30 calendar days after the date the property was transferred to you (per IRC Section 83(b)(2)). This is a statutory deadline with no extensions and no exceptions. Form 15620 did not change it. Even one day late makes the election invalid.
The clock starts on the transfer date, which for restricted stock is typically the grant or issuance date when the shares are legally issued and subject to vesting restrictions. This is not necessarily the date the board approved the grant or the date you signed paperwork, though in many startup cases those dates coincide.
There is one wrinkle. Under IRC Section 7503, if the 30th day falls on a Saturday, Sunday, or legal holiday, your filing is timely if it is postmarked by the next business day for mail. Count 30 calendar days, and if day 30 is a weekend or holiday, you get until the next business day (per IRC Section 7503 and IRS Form 15620 on IRS.gov).
There is no established late-filing relief. Because this is a statutory deadline rather than a regulatory one, the usual IRS Section 9100 relief procedures generally do not apply (per Treas. Reg. Section 301.9100-1), and practitioners report little success pursuing them here.
Missing the window means you fall back to the default Section 83 rules: you recognize ordinary income as your equity vests, based on FMV at each vesting date. You cannot retroactively elect 83(b). At that point, talk to a tax advisor about how to plan for the vesting-based tax going forward.
Form 15620 is the IRS's standardized form for making a Section 83(b) election, published in late 2024 as the first official form of its kind (per IRS.gov and firm alerts from Goodwin and BDO). Before it, taxpayers drafted their own election letters that had to contain all the required information by hand.
The form asks for your name, address, and Taxpayer Identification Number, a description of the property, the transfer date and tax year, the nature of the restrictions, the FMV at transfer, the amount you paid, and the amount to include in income. It also confirms you provided a copy to the company. These fields track Treasury Regulation Section 1.83-2 and Rev. Proc. 2012-29.
The old process required you to write your own election letter and confirm it included every required element. A missing element risked an invalid election. Form 15620 folds all of those requirements into a single standardized form, which reduces the chance of leaving something out.
You may technically still use a written statement with the required information, but Form 15620 is now the recommended, safer method. Teams relying on older guidance that instructs them to draft their own letter should use the form in 2026.
When grants, vesting schedules, and election paperwork are tracked across spreadsheets and inboxes, compliance gaps tend to appear.
To file an 83(b) election, you must provide the following information to the IRS:
Here are the detailed steps for filing an 83(b) election:
1. Gather the necessary information: Collect all the required details, including your name, address, Tax Identification Number (TIN), and specifics about the restricted stock or profits interest you received.
2. Determine the fair market value (FMV): Establish the FMV of the property at the time of transfer, taking into account any applicable restrictions.
3. Prepare the written statement: Draft a written statement containing all the required information, including your intention to make an 83(b) election. The statement should include a description of the property for which you're making the election, the date of the transfer, and the taxable year for which the election is being made.
4. File with the IRS: Send the written statement to the IRS Service Center, where you file your tax returns. This must be done within 30 days of the grant date. You should send the form via certified mail to ensure it reaches the IRS.
5. Provide a copy to the company: Submit a copy of the completed election form to the employer. This helps the company maintain accurate records.
6. Keep records: Retain a copy of the 83(b) election for your records, along with proof of timely filing. You will need to attach a copy of the 83(b) election form to your tax return in the year you receive the stock.
Use this checklist to file cleanly and prove you did.
The election applies differently depending on the award. Restricted stock is the classic case because you already hold actual shares. Stock options are trickier, because an unexercised option is a right to buy, not property you own yet.
RSAs are the primary use case for an 83(b) election. You receive actual stock now, subject to vesting or a repurchase right if you leave before vesting. A timely election lets you recognize the small amount of income today and treat all future appreciation as capital gain.
This is why founders who buy common stock at par subject to vesting almost always consider an 83(b) election right after incorporation, when FMV is at its lowest.
You cannot file an 83(b) election on unexercised ISOs or NSOs, because options are not property under Section 83. Early-exercising options before they vest gives you restricted stock, and an 83(b) election becomes available within 30 days of the exercise date.
Watch the Alternative Minimum Tax (AMT) with ISOs. Exercising ISOs can trigger AMT on the spread between FMV and the exercise price, even when it is not regular taxable income. An 83(b) election changes regular tax timing on the shares, but it does not eliminate AMT exposure. Early-exercising ISOs when FMV is low, paired with a timely election, can keep both regular tax and AMT small.
You generally cannot file a valid 83(b) election for restricted stock units. An RSU is a promise to deliver shares or cash in the future, and no actual stock transfers to you at grant. Section 83(b) requires a present transfer of property, so an attempted election on RSUs is simply ineffective. Practitioners treat RSUs as ineligible without meaningful exceptions.
As discussed above, by making an 83(b) election you could potentially lock in a lower tax rate and avoid higher taxes in the future when the stocks appreciate. You also gain a degree of tax certainty that is useful for long-term financial planning.
However, 83(b) election is not suitable for everyone and carries risks like overpaying taxes if the stock value decreases or losing unvested shares on leaving the company. At Qapita, we understand the complexities of equity management and the need to make informed financial decisions.
We are here to provide personalized advice and services regarding 83(b) elections and other equity management needs. Book a free consultation with our tax experts.
A federal Section 83(b) election does not automatically control state or local tax results. Many states follow federal timing, but sourcing, residency, payroll rules, and community property laws can change the outcome. A state tax adviser can confirm treatment before income is reported.
If you fail to submit your 83(b) election form within 30 days after the grant date, then you will be required to pay federal taxes on stock awards at each vesting date.
Your gross income will be subject to ordinary income tax on the gap between the stock's value on the vesting date and the purchase price. This could result in a significantly higher tax liability when the stock value appreciates over the vesting period.
To file an 83(b) election, you need to complete the IRS 83(b) form and mail it to the IRS within 30 days of the grant. You must ensure that you send it to the relevant IRS Service Center, where you file your taxes. After mailing the completed form to the IRS, you should also mail a copy of the completed form to the company.
The IRS does not typically acknowledge receipt or send any correspondence regarding the filing. However, you can attempt to get confirmation by calling the IRS. It is recommended that you send the 83(b) election through USPS Certified Mail to receive a mailing receipt, which can be retained as proof that you have made the filing.
An 83(b) election can create current taxable income, which may increase quarterly estimated tax needs even when cash pay stays unchanged. Some employers also review withholding treatment for related compensation entries. Payroll, tax, and equity teams should align records before year-end forms are prepared.
