83(b) Election Guide for Founders
Written by Aparna Devalla, CPA
Curated by Rubric Financial
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What an 83(b) Election Is
- An 83(b) election is a filing with the IRS that allows you to pay income tax on the fair market value of restricted stock at the time of grant, rather than as it vests.
- Under IRC Section 83, restricted stock is normally taxed as ordinary income at each vesting event based on the stock's fair market value at that time.
- By filing an 83(b), you elect to recognize all taxable income upfront, typically when the stock value is at its lowest (often near zero for early-stage startups).
- This election is most commonly used by founders who receive restricted stock subject to a vesting schedule at or near the time of incorporation.
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GlossarySection 83(b) Election
Tax election for restricted stock holders to be taxed on grant-date value instead of vesting value.
InsightHow to File an 83(b) Election: Form 15620, E-Filing, and the 30-Day Clock
The 83(b) election is twenty minutes of paperwork with a 30-day fuse. Here is who needs to file, the tax math behind the decision, and the step-by-step mechanics: Form 15620, IRS e-filing, certified mail, and the records to keep forever.
GlossaryFounder Shares
Common stock issued to the founders at formation, usually for nominal consideration; subject to reverse vesting and a §83(b) election.
InsightMissed Your 83(b) Election Deadline? What Happens and What You Can Actually Do
The 30-day 83(b) deadline has no extension and no late filing. Here is how to confirm whether you actually missed it, what it costs if you did, and the remediation paths that genuinely exist.
GlossarySection 83(b) Election
IRS filing within 30 days of receiving restricted stock that elects to pay tax upfront at the (low) grant FMV rather than at vesting.
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