83(b) Election Form and Filing Guide for Startup Founders (2025)

Quick Facts About 83(b) Elections

  • Purpose: Elect to pay taxes on restricted stock NOW (at grant/exercise) instead of later (as it vests)
  • IRS Form: Form 15620 (revised April 2025)
  • Deadline: 30 calendar days from grant/exercise date (STRICT—no extensions)
  • Filing Methods: Electronic filing (preferred) or certified mail
  • Who Should File: Founders receiving restricted stock, employees doing early exercise of options
  • Tax Benefit: Avoid ordinary income tax on appreciation between grant and vesting; only pay capital gains on future appreciation
  • Risk: If stock becomes worthless, you paid taxes on value you never received (non-refundable)
  • Cost to File: $0 (no IRS filing fee)

Why File an 83(b) Election?

An 83(b) election can save startup founders and early employees tens or hundreds of thousands of dollars in taxes.

Example: Without 83(b) Election

Year 1: You receive 1 million shares of restricted stock with 4-year vesting, fair market value (FMV) $0.01/share

  • Tax at grant: $0 (no tax until vesting)

Year 2: After 1 year, 250k shares vest, FMV now $1.00/share

  • Ordinary income tax: 250k shares × $1.00 = $250,000 taxable income
  • Tax owed (37% top rate): ~$92,500

Year 5: You sell vested stock, FMV now $10.00/share

  • Capital gains tax: (250k shares × $10) - (250k × $1) = $2.25M gain
  • Tax owed (20% LTCG): ~$450,000
  • Total taxes: $92,500 + $450,000 = $542,500

Example: With 83(b) Election

Year 1: You file 83(b) election within 30 days of receiving 1 million shares, FMV $0.01/share

  • Ordinary income tax at grant: 1M shares × $0.01 = $10,000 taxable income
  • Tax owed (37% top rate): ~$3,700

Year 2-4: Shares vest

  • Tax at vesting: $0 (already paid in Year 1)

Year 5: You sell all shares, FMV now $10.00/share

  • Capital gains tax: (1M shares × $10) - (1M × $0.01) = $9.99M gain
  • Tax owed (20% LTCG): ~$1,998,000
  • Total taxes: $3,700 + $1,998,000 = $2,001,700

Savings with 83(b): $542,500 - $2,001,700 = ... Wait, that's MORE tax!

Let me recalculate the "without 83(b)" scenario correctly:

Corrected Example: Without 83(b) Election

Year 1-4: Shares vest annually (250k/year), FMV increases each year

  • Year 1: 250k vest at $0.01 → $2,500 ordinary income
  • Year 2: 250k vest at $1.00 → $250,000 ordinary income
  • Year 3: 250k vest at $5.00 → $1,250,000 ordinary income
  • Year 4: 250k vest at $10.00 → $2,500,000 ordinary income
  • Total ordinary income: $4,002,500
  • Tax owed (37%): ~$1,480,925

Year 5: You sell, capital gains on appreciation above vesting-date FMV = $0 (already taxed as ordinary income at vesting)

Total taxes without 83(b): ~$1,480,925

Total taxes with 83(b): ~$2,001,700

Hmm, that's still not showing the benefit. Let me recalculate with long-term capital gains properly:

Corrected Example WITH 83(b) - Capital Gains on Full Appreciation

With 83(b): You pay ordinary income tax on $10,000 at grant, then long-term capital gains on $9.99M appreciation

  • Ordinary income tax: ~$3,700
  • Long-term capital gains (20%): ~$1,998,000
  • Total: ~$2,001,700

Without 83(b): You pay ordinary income tax on $4M as shares vest, then NO additional tax on sale (because you already paid ordinary income tax on the full value as it vested)

  • Ordinary income tax: ~$1,480,925
  • Capital gains: $0
  • Total: ~$1,480,925

Wait, this STILL shows higher taxes with 83(b)! Let me think about this more carefully...

The key difference is:

  • With 83(b): Ordinary income on $10k (low), capital gains on $9.99M (high)
  • Without 83(b): Ordinary income on $4M (high), capital gains on $6M (lower)

Tax rates:

  • Ordinary income: 37%
  • Long-term capital gains: 20%

Let me recalculate ONE MORE TIME with the correct understanding:

FINAL CORRECTED EXAMPLE

Scenario: 1M shares, FMV $0.01 at grant, vests over 4 years, sell at $10/share in Year 5

WITHOUT 83(b):

  • At vesting (Years 1-4): Pay ordinary income tax on FMV at each vesting date

    • Assume FMV grows: $0.01, $1, $5, $10 over 4 years
    • 250k vest × $0.01 = $2.5k income (Year 1)
    • 250k vest × $1 = $250k income (Year 2)
    • 250k vest × $5 = $1.25M income (Year 3)
    • 250k vest × $10 = $2.5M income (Year 4)
    • Total ordinary income: $4,002,500
    • Tax (37%): ~$1,480,925

  • At sale (Year 5): Capital gains tax on appreciation from vesting-date FMV to sale price

    • Year 1 shares: ($10 - $0.01) × 250k = $2.4975M gain
    • Year 2 shares: ($10 - $1) × 250k = $2.25M gain
    • Year 3 shares: ($10 - $5) × 250k = $1.25M gain
    • Year 4 shares: ($10 - $10) × 250k = $0 gain
    • Total capital gains: $5,997,500
    • Tax (20% LTCG): ~$1,199,500

  • TOTAL TAX: $1,480,925 + $1,199,500 = $2,680,425

WITH 83(b):

  • At grant (Year 1): Pay ordinary income tax on FMV ($0.01) × 1M shares = $10,000

    • Tax (37%): ~$3,700

  • At vesting (Years 1-4): $0 tax (already paid at grant)

  • At sale (Year 5): Capital gains tax on FULL appreciation from grant-date FMV to sale price

    • ($10 - $0.01) × 1M shares = $9,990,000 gain
    • Tax (20% LTCG): ~$1,998,000

  • TOTAL TAX: $3,700 + $1,998,000 = $2,001,700

TAX SAVINGS WITH 83(b): $2,680,425 - $2,001,700 = $678,725 saved! ✅

When Should You File an 83(b) Election?

You should file an 83(b) election when:

  • [ ] You receive restricted stock (stock subject to vesting schedule)
  • [ ] You do an early exercise of stock options (exercising unvested options)
  • [ ] The stock has low FMV now (ideally at formation, when FMV = $0.01 or less)
  • [ ] You believe the stock will appreciate significantly
  • [ ] You can afford to pay tax on current FMV (even if illiquid)
  • [ ] You plan to hold the stock long-term (for capital gains treatment)

You should NOT file an 83(b) election when:

  • [ ] You received stock options that have NOT been exercised (83(b) doesn't apply to options)
  • [ ] You received RSUs (restricted stock units—not eligible for 83(b))
  • [ ] The FMV is already high (you'd owe large tax bill upfront)
  • [ ] There's significant risk the company will fail (you'd pay tax on worthless stock)
  • [ ] You can't afford the tax bill

The 30-Day Deadline (STRICT—No Extensions)

⚠️ CRITICAL: The 83(b) election MUST be filed within 30 calendar days of the date you receive the stock or exercise your options.

The IRS is extremely strict about this deadline:

  • No extensions for any reason
  • No late filing accepted
  • No do-overs if you miss it
  • If Day 30 falls on a weekend or federal holiday, deadline extends to next business day

Date the clock starts:

  • Restricted stock grant: Date you receive the stock (typically the date of the grant agreement)
  • Early exercise of options: Date you exercise the options (purchase the unvested shares)

Example:

  • Stock granted: January 1, 2025
  • 30-day deadline: January 31, 2025
  • Must be postmarked (if mailing) or submitted online by January 31, 2025

Set a reminder: File within 7-14 days of receiving stock to avoid missing deadline.

New for 2025: IRS Form 15620 and Electronic Filing

IRS Form 15620

In April 2025, the IRS released Form 15620 as the standardized 83(b) election form.

Prior to 2025: Taxpayers prepared custom election letters following IRS guidelines (no official form existed)

Starting 2025: Taxpayers can use Form 15620 OR prepare a custom election letter (both accepted)

Download Form 15620: https://www.irs.gov/pub/irs-pdf/f15620.pdf

Electronic Filing (New in June 2025!)

Starting June 2025, Form 15620 can be filed electronically through the IRS mobile-friendly forms portal.

Benefits of electronic filing:

  • Immediate confirmation of receipt (no waiting for certified mail receipt)
  • Secure, retrievable electronic records
  • No postage or certified mail fees
  • Faster processing

Electronic filing URL: https://www.irs.gov/e-file-providers/mobile-friendly-forms

Note: You only need to file ONCE—either electronically OR by mail, not both.

How to File an 83(b) Election (Step-by-Step)

Step 1: Gather Required Information

You'll need:

  • [ ] Your name, address, and Social Security Number (SSN) or Taxpayer ID (TIN)
  • [ ] Company name, address, and Employer Identification Number (EIN)
  • [ ] Date you received the stock or exercised options
  • [ ] Number of shares received
  • [ ] Purchase price paid (if any)
  • [ ] Fair Market Value (FMV) per share on grant/exercise date
  • [ ] Vesting schedule

Where to find FMV: Your company should provide the FMV in the stock grant agreement or option exercise documents. For early-stage startups, FMV is typically set by 409A valuation.

Step 2: Complete the Election Form

Option A: Use IRS Form 15620 (Recommended)

Download and complete Form 15620:

  • Part I: Your identifying information (name, SSN, address)
  • Part II: Property description (shares, purchase price, FMV, restrictions)
  • Part III: Company information (name, EIN, address)
  • Part IV: Signature and date

Option B: Prepare Custom Election Letter

If you prefer the traditional approach, prepare a letter containing all required information (see Section: Sample 83(b) Election Letter below).

Step 3: File with the IRS

Option A: Electronic Filing (Preferred)

  1. Go to IRS mobile-friendly forms portal: https://www.irs.gov/e-file-providers/mobile-friendly-forms
  2. Search for "Form 15620"
  3. Complete form online
  4. Submit electronically
  5. Save confirmation receipt

Option B: Mail to IRS (Certified Mail)

  1. Print and sign Form 15620 (or election letter)

  2. Make 3 copies:

    • Original for IRS
    • Copy for your tax records
    • Copy for company

  3. Prepare mailing envelope:

    • Address to the IRS Service Center where you file your personal tax return (see Section: IRS Mailing Addresses below)
    • Use certified mail, return receipt requested
    • Write certified mail tracking number on your copy

  4. Mail from USPS office (get postmark on certified mail receipt)

  5. Save:

    • Certified mail receipt (PS Form 3800) with postmark
    • Return receipt (green card) when it arrives
    • Copy of election for your records

Step 4: Provide Copy to Company

You must provide a copy of your 83(b) election to your company.

  • Email copy to finance/HR: [[email protected]]
  • OR deliver physical copy
  • Company needs this for their tax records

Step 5: Include Copy with Tax Return

When you file your tax return for the year you made the election:

  • Attach copy of 83(b) election to your tax return (Form 1040)
  • Report the income from the election on your tax return
  • Income = (FMV per share × number of shares) - purchase price paid

Example:

  • 1M shares at $0.01 FMV
  • Purchase price: $0.001 per share (founder stock)
  • Income to report: (1M × $0.01) - (1M × $0.001) = $10,000 - $1,000 = $9,000

IRS Mailing Addresses for 83(b) Elections

If filing by mail, send to the IRS Service Center where you file your personal tax return.

Find your Service Center: https://www.irs.gov/filing/where-to-file-certain-elections-statements-returns-and-other-documents

Common addresses (verify current address on IRS.gov):

If you live in:

  • California, Hawaii: Department of the Treasury, Internal Revenue Service, Fresno, CA 93888
  • New York, Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999
  • Texas, Louisiana, Mississippi, Oklahoma, Arkansas: Department of the Treasury, Internal Revenue Service, Austin, TX 73301
  • Florida, Georgia, North Carolina, South Carolina, Virginia, West Virginia: Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999

International taxpayers: Department of the Treasury, Internal Revenue Service, Austin, TX 73301

⚠️ Verify current address: IRS addresses change periodically. Check https://www.irs.gov before mailing.

Sample 83(b) Election Letter (If Not Using Form 15620)

You can use this letter format if you prefer not to use Form 15620:

ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE OF 1986

The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code, to include in gross income for the current taxable year, the amount of any compensation taxable in connection with the taxpayer's receipt of the property described below.

1. The name, address, and taxpayer identification number of the undersigned are:

   Name: [YOUR FULL NAME]
   Address: [YOUR STREET ADDRESS]
            [YOUR CITY, STATE, ZIP CODE]
   Social Security Number: [XXX-XX-XXXX]

2. The property with respect to which this election is being made is:

   [NUMBER] shares of common stock of [COMPANY NAME] (the "Company")

3. The date on which the property was transferred is: [MONTH DAY, YEAR]

4. The property is subject to the following restrictions:

   The shares are subject to the Company's right to repurchase at the original purchase price upon termination of service. This repurchase right lapses with respect to [VESTING SCHEDULE—e.g., 25% of the shares after one year of continuous service and 1/48th of the shares monthly thereafter over the following three years].

5. The fair market value at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse) of the property with respect to which this election is being made was:

   Fair Market Value per Share: $[X.XX]
   Total Fair Market Value: $[X,XXX] ([NUMBER] shares × $[X.XX])

6. The amount paid for the property:

   Purchase Price per Share: $[X.XX]
   Total Purchase Price: $[X,XXX] ([NUMBER] shares × $[X.XX])

7. The amount to include in gross income is:

   $[X,XXX] (Total FMV of $[X,XXX] less Total Purchase Price of $[X,XXX])

8. A copy of this statement has been furnished to the Company.

9. The taxable year to which this election relates is the calendar year [YEAR].

Dated: [MONTH DAY, YEAR]

_________________________________
[YOUR SIGNATURE]
[YOUR PRINTED NAME]

The undersigned spouse of taxpayer joins in this election.

_________________________________
[SPOUSE SIGNATURE, if applicable]
[SPOUSE PRINTED NAME]

Save this letter as a PDF and:

  1. File electronically via IRS portal (if available)
  2. OR mail to IRS via certified mail, return receipt requested
  3. Provide copy to company
  4. Attach copy to tax return

What Happens After You File?

1. IRS Receipt Confirmation

Electronic filing:

  • You'll receive immediate confirmation
  • Save confirmation email/receipt

Mail filing:

  • Return receipt (green card) arrives in 1-4 weeks
  • If no receipt after 4 weeks, contact IRS at 1-800-829-1040

2. Report Income on Tax Return

In the year you file the 83(b) election:

  • Report income on Form 1040, Line 1 (wages, salaries, tips)
  • Or your accountant may report it on Schedule 1, Line 8 (other income)
  • Attach copy of 83(b) election to tax return

Your company should issue Form W-2 or 1099-NEC reporting this income (if you're an employee or contractor)

If you receive restricted stock as a founder for minimal cash (e.g., $0.001/share) and FMV is $0.01/share:

  • Income = ($0.01 - $0.001) × 1M shares = $9,000
  • This is a manageable tax bill

3. Company Recordkeeping

Your company will:

  • Record your 83(b) election in your cap table/equity records
  • Issue Form W-2 or 1099-NEC reporting the income (if required)
  • Track your cost basis (for future capital gains calculations)

4. When You Sell the Stock

Years later, when you sell the vested stock:

  • Holding period for LTCG starts on grant/exercise date (the date you filed 83(b), not vesting date)
  • Cost basis = FMV you reported on 83(b) election
  • Capital gain = Sale price - Cost basis

Example:

  • 83(b) election filed in Year 1: 1M shares, FMV $0.01, cost basis $10,000
  • Sell in Year 5: 1M shares at $10/share = $10M
  • Capital gain: $10M - $10,000 = $9,990,000
  • LTCG tax (20%): ~$1,998,000

Common Mistakes to Avoid

  1. Missing the 30-day deadline: The #1 mistake. Set a reminder and file within 7-14 days.

  2. Not sending via certified mail: Without proof of mailing, you have no evidence of timely filing.

  3. Wrong IRS address: Double-check the IRS Service Center address for your state.

  4. Not providing copy to company: Company needs this for their tax records and to issue your W-2/1099.

  5. Not attaching to tax return: Attach copy to your tax return for the year you made the election.

  6. Filing for stock options (not yet exercised): 83(b) only applies to restricted stock or early exercise, not unexercised options.

  7. Filing for RSUs: Restricted Stock Units (RSUs) are not eligible for 83(b) elections.

  8. Not consulting tax advisor: Every situation is different. Get professional advice.

  9. Filing late and trying to get an extension: There are no extensions—ever.

  10. Forgetting to sign the election: Unsigned elections may be rejected by IRS.

FAQs

1. What is the 30-day deadline?

The 83(b) election must be filed within 30 calendar days of the date you receive restricted stock or exercise unvested options. If Day 30 is a weekend or federal holiday, the deadline extends to the next business day.

2. Can I get an extension if I miss the deadline?

No. There are absolutely no extensions for 83(b) elections. If you miss the 30-day deadline, you cannot file an 83(b) election.

3. Do I need to file 83(b) for stock options I haven't exercised yet?

No. 83(b) elections only apply to restricted stock (stock you already own subject to vesting) or early exercise of options (when you exercise unvested options). Regular stock options (that you haven't exercised yet) do not require 83(b) elections.

4. Do I need to file 83(b) for RSUs (Restricted Stock Units)?

No. RSUs are not eligible for 83(b) elections. RSUs are taxed as ordinary income when they vest, and there's no way to accelerate the tax treatment.

5. How much does it cost to file?

$0. There is no IRS filing fee. If you mail the election, you'll pay ~$5-10 for certified mail, return receipt requested.

6. What if I file electronically AND by mail?

Don't do this. File once using one method (electronic or mail). Filing twice may confuse the IRS and your tax records.

7. Should I use Form 15620 or write a custom letter?

Either is acceptable. Form 15620 is easier and less likely to have errors. Custom letters are fine if you follow the required format (see sample above).

8. Where do I mail the 83(b) election?

Mail to the IRS Service Center where you file your personal tax return. Find your Service Center at: https://www.irs.gov/filing/where-to-file-certain-elections-statements-returns-and-other-documents

9. Do I need to file separately for each grant of restricted stock?

Yes. If you receive multiple grants of restricted stock on different dates, you must file a separate 83(b) election for each grant within 30 days of each grant date.

10. What if the stock becomes worthless after I file?

If the company fails and the stock becomes worthless, you cannot get a refund of the taxes you paid on the 83(b) election. However, you may be able to claim a capital loss when you dispose of the worthless stock.

11. What if I leave the company before vesting?

If you leave before vesting and forfeit unvested shares, you may be able to claim a capital loss for the amount you paid for the forfeited shares (but not the taxes you paid on the 83(b) election).

12. Can I file 83(b) if I'm not a US taxpayer?

Yes, if you're subject to US income tax (e.g., working in the US on a visa). Consult an international tax advisor.

Checklist: Filing Your 83(b) Election

Use this checklist to ensure you file correctly:

  • [ ] Day 0: Receive restricted stock or exercise unvested options—note the date
  • [ ] Within 7 days: Gather required information (shares, FMV, purchase price, company EIN)
  • [ ] Within 14 days: Complete Form 15620 or prepare custom election letter
  • [ ] Within 20 days: File with IRS (electronically or mail via certified mail)
    • [ ] Electronic: Submit via IRS mobile-friendly forms portal
    • [ ] OR Mail: Send via certified mail, return receipt requested, with postmark
  • [ ] Within 25 days: Provide copy to company (email or physical delivery)
  • [ ] Save records:
    • [ ] Copy of 83(b) election
    • [ ] Proof of timely filing (confirmation email or certified mail receipt with postmark)
    • [ ] Return receipt (if mailed)
  • [ ] Tax return (next year): Attach copy of 83(b) election to Form 1040
  • [ ] Tax return (next year): Report income from 83(b) election on Form 1040

Related Resources

From Promise Legal:

External Resources:

  • IRS Form 15620 (Official): https://www.irs.gov/pub/irs-pdf/f15620.pdf
  • IRS Mobile-Friendly Forms (Electronic Filing): https://www.irs.gov/e-file-providers/mobile-friendly-forms
  • IRS Where to File: https://www.irs.gov/filing/where-to-file-certain-elections-statements-returns-and-other-documents
  • IRC Section 83(b) (Law): https://www.law.cornell.edu/uscode/text/26/83
  • Cooley GO 83(b) Guide: https://www.cooleygo.com/what-is-a-section-83b-election/

Get Legal Help

Need help with 83(b) elections or founder equity?

Promise Legal helps startup founders with:

  • Reviewing restricted stock grant agreements
  • Calculating FMV for 83(b) elections
  • Preparing and filing 83(b) elections
  • Founder equity structures and vesting schedules
  • Tax planning for equity compensation
  • Stock option plan design

Schedule a consultation or email us at [email protected].

Disclaimer: This resource is provided for informational purposes only and does not constitute tax or legal advice. The 83(b) election has significant tax consequences and missing the 30-day deadline cannot be corrected. You should consult with qualified tax and legal advisors before filing an 83(b) election to ensure it is appropriate for your specific circumstances. Promise Legal assumes no liability for any damages arising from use of this resource.

Last Updated: September 30, 2025

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