Startup Law
What is an 83(b) election and do I need to file one?
An 83(b) election is a one-page filing that tells the IRS to tax your restricted (unvested) stock now, at its low grant-date value, instead of as it vests at potentially much higher values. Founders and early employees who receive stock subject to vesting usually file one to lock in a low tax cost and start the capital-gains and QSBS clocks. You must file it within 30 days of receiving the stock — the deadline is absolute, with no extensions.
What does an 83(b) election actually do?
When you receive stock that vests over time, the default rule taxes you as it vests, on the value at each vesting date, as ordinary income; an 83(b) election flips that so you are taxed on the full value at grant — often near zero for founders.
Future appreciation is then taxed later as capital gain on sale, not as ordinary income at vesting.
Do I need to file one?
Usually yes if you hold restricted, unvested stock with a low current value — but weigh the forfeiture risk: if you leave before vesting, you do not get back the tax you paid.
For founders receiving stock at formation, the value is often near zero, so the tax cost of filing is small and the downside protection is large.
What is the deadline, and what happens if I miss it?
You must file within 30 days of receiving the stock; there is no IRS relief for simply forgetting, and missing it means you are taxed as the stock vests, on its value at each vesting date.
If the company's value rose, that can be a large ordinary-income tax bill on shares you cannot yet sell.
How do I file an 83(b) election?
Complete the IRS Form 15620 for the election (or a compliant written statement), file it with the IRS within 30 days of receiving the stock, give a copy to the company, and keep proof of filing. The 30-day deadline is absolute, with no extensions.
Keep your proof of mailing or submission with your tax records — you may need it later.
How does the 83(b) election connect to vesting and QSBS?
Filing at grant starts your capital-gains holding period and your QSBS clock early, which can matter a great deal at a later sale.
Coordinate the election with your vesting documents and entity choice. See the equity-and-vesting and entity pages.
Talk to a startup attorney
Just received founder stock or an early-exercise option grant? The 30-day clock is running and there are no do-overs. Call Adam Lysinski for a free 5-minute triage: (773) 777-9888.
Frequently asked questions
What is the 83(b) deadline?
You must file within 30 days of the date the stock is transferred to you. There are no extensions. Mark the date the moment you receive founder stock.
Can I still use my own letter, or must I use Form 15620?
A compliant written statement that meets the Treasury regulation has long been acceptable, and the IRS also publishes a standardized Form 15620. Either one works as long as it contains the information the regulation requires and is filed within 30 days. Either way, you must give a copy to the company.
What happens if I miss the deadline?
You generally lose the election permanently and are taxed as the stock vests, on its value at each vesting date — potentially large ordinary income if the company's value rose. There is no IRS 'late 83(b)' relief for simply forgetting, which is why the date is critical.
Do I owe tax when I file an 83(b)?
You may. You recognize income equal to the stock's value at grant minus what you paid. For founder stock issued at formation, that spread is often near zero, so little or no tax is due — which is exactly why filing early matters. Confirm the numbers with a tax advisor.
Does an 83(b) election apply to stock options?
Generally no. It applies to restricted stock and to early-exercised options where you actually receive shares — not to standard unexercised options. If you early-exercise options, an 83(b) election may be important; check before you exercise.
Do I have to attach the election to my tax return?
The IRS removed the requirement to attach a copy of the 83(b) election to your annual return for stock transferred on or after January 1, 2016. You must still file it on time and keep your proof of filing.
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