What Is an 83(b) Election? The Founder-Friendly Basics

If you’re joining a startup or starting one, you might hear a piece of advice that sounds like a secret handshake: “Don’t forget your 83(b).” They’re talking about an 83(b) election, a U.S. tax filing that can make a huge difference in how (and when) your equity gets taxed.

Here’s the plain-English breakdown.

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The one-sentence definition

An 83(b) election is a choice you can make when you receive equity that is subject to vesting or forfeiture (often called “substantially nonvested” property): you elect to include the equity’s value in your income now (at transfer) instead of later (when it vests). (IRS)

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Why it matters: “tax now” can be cheaper than “tax later”

When equity vests over time, the default tax treatment can create a problem:

• Early on, your shares may be worth very little.
• Later, if the company grows, those shares could be worth a lot more.

With an 83(b) election, you’re essentially saying:

“Tax me based on the value today (often low), not on the value later (possibly much higher).” (IRS)

This is why founders and early employees pay attention to it: filing at a low valuation can reduce the risk of a large ordinary-income tax bill showing up as shares vest.

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When does an 83(b) typically come up?

You’ll most commonly hear about 83(b) when you receive:

• Restricted stock / founder stock purchased or issued subject to vesting (you “own” it, but can lose unvested shares if you leave). (IRS)
• Stock from an early exercise of options (you exercise before vesting, receive shares that are still subject to forfeiture).

Important nuance: an 83(b) is generally tied to a transfer of property (like actual shares). That’s why it often applies to restricted stock and early exercise scenarios not every equity award type.

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The #1 rule: the 30-day deadline

If there’s one thing to remember, it’s this:

An 83(b) election must be filed within 30 days after the date the property is transferred. (IRS)

That window is tight and missing it can eliminate the benefit you were trying to get.

(There are limited timing mechanics like “next business day” if the 30th day falls on a weekend or legal holiday, but the main takeaway is: treat it as a 30-day countdown.) (IRS)

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How to file (what people actually do)

1) Use the IRS form (or a compliant written statement)

As of 2025, the IRS provides Form 15620 (Section 83(b) Election). You can also make the election using a written statement that meets the regulatory requirements. (IRS)

2) Submit it to the IRS (online or by mail)

The IRS “mobile-friendly forms” system explains that you can submit online or download for mailing, and that an IRS Online Account is required for mobile-friendly forms that need signatures. (IRS)

The Form 15620 instructions also describe submitting the completed/signed form to the IRS “via mail” with the IRS office where you file your federal return so depending on your situation, you may be using either the online submission option or mailing it. (IRS)

3) Send copies to the right parties + keep proof

You’re generally expected to provide a copy to:

• the person/company you’re providing services for, and
• the transferee of the property if that’s a different party. (IRS)

Also: keep timestamped proof of filing (confirmation, certified mail receipt, etc.).

One more helpful update: the IRS issued final regulations eliminating the old requirement to submit a copy with your tax return for the year of transfer but you still need to keep good records. (IRS)

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A simple example (why founders file early)

Imagine you purchase 100,000 founder shares at $0.01/share.

• Today: FMV is ~$0.01/share → the “spread” (FMV minus what you paid) may be tiny.
• Two years later: the company grows and FMV is $2.00/share.

If you didn’t file an 83(b), you could owe ordinary income tax as shares vest at higher values. If you do file an 83(b), you may lock in a much lower taxable amount at the start (sometimes close to zero), and then future appreciation is more likely to be treated as gain when you sell (often capital gains, depending on your holding period and specifics).

That’s the core strategy: pay tax when the value is low rather than when it’s high. (IRS)

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Risks and tradeoffs to know

An 83(b) election isn’t automatically “good.” Common downsides:

• You might pay tax now and then the equity never becomes valuable.
• If you forfeit unvested shares, you generally don’t get to unwind the original decision easily.
• An 83(b) election generally can’t be revoked unless the IRS consents. (IRS)

This is why it’s worth reviewing with a tax professional especially if the equity has meaningful current value.

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Quick checklist (save this)

If you’re receiving restricted stock or early-exercising:

• ✅ Confirm whether what you received is subject to vesting/forfeiture
• ✅ Decide whether an 83(b) is appropriate for you
• ✅ File within 30 days of transfer (IRS)
• ✅ Use Form 15620 (or compliant written statement) (IRS)
• ✅ Keep proof + provide required copies (IRS)

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Wrap-up

An 83(b) election is one of those startup admin tasks that feels small until it isn’t. If your equity is vesting and the current value is low, filing on time can protect you from a much larger tax bill later.

Standard reminder: this is general educational info, not tax advice. If you’re dealing with real equity paperwork, it’s worth getting personalized guidance.

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