When you join an early-stage company or negotiate a founder-level equity package, there’s often one decision that quietly determines whether you keep thousands, or millions, more of your wealth in the long run: whether or not you file an 83(b) election.
Most people hear about the 83(b) election only in passing. Others find out too late. Many assume it’s simply “a tax form for startups.” In reality, the 83(b) election is one of the most powerful tax-planning tools available to founders, early employees, and executives who receive stock that vests over time.
But it only works if you understand the rules, the risks, the math, and the deadlines.
This is your complete, soup-to-nuts, VIP-style guide.
Under IRS rules, when you receive restricted stock, stock that vests over time, the IRS typically taxes you as it vests. That means:
The 83(b) election lets you flip that tax treatment on its head. Instead of being taxed at each vest date, you elect to be taxed upfront on the FMV as of the grant date, even though the shares haven’t vested yet.
Why? Because at early-stage companies, the FMV at grant is often extremely low, sometimes pennies or fractions of a cent per share. Paying taxes on a tiny number now to convert future growth into long-term capital gains is one of the biggest financial planning levers for founders and early employees.
When you file the 83(b):
This is why the 83(b) election is considered a wealth-acceleration strategy rather than just a tax form.
Scenario
You receive 100,000 shares of restricted stock in a seed-stage company.
You are taxed on each vesting tranche as it vests. If the company’s value grows to $5.00 per share by Year 4:
You pay taxes on Day 1:
This is why startup attorneys and sophisticated advisors constantly emphasize:
👉 “The 83(b) election is the founder’s (or early employee’s) best friend.”
The 83(b) election is most beneficial when ALL of the following conditions are met:
There are situations where an 83(b) election is not advisable:
You can file an 83(b) election for early-exercised options, but only if:
This is a key tax-planning move for employees at pre-IPO firms that offer early-exercise rights. Effective 2025, with the release of the new form and online filing, early-exercise plus timely 83(b) filings are now more streamlined.
It converts your option into restricted stock for tax purposes, allowing you to take advantage of long-term capital gains treatment on future appreciation.
The IRS requires that the 83(b) election be filed within 30 days of the date the property (stock, profits interest, etc.) is transferred to you.
This deadline is absolute:
Miss the 30-day window and the opportunity is gone forever!
Given recent developments, the filing process for a 2025 83(b) election has changed in two key ways: (1) the IRS has released an official form, and (2) electronic filing is now available.
Here’s the updated, step-by-step process:
On November 7, 2024, the IRS released Form 15620 — the first standardized form for making Section 83(b) elections.
While taxpayers previously filed self-drafted letters under the model language from old guidance, using Form 15620 ensures you include all required information (name/TIN/address; description of property; date of transfer; FMV; restrictions; etc.).
Taxpayers are not strictly required to use Form 15620 — a compliant written statement under old rules (Treas. Reg. § 1.83-2(e)) remains acceptable.
The election must be filed no later than 30 days after the date the property is transferred.
If the 30th day ends on a Saturday, Sunday, or federal holiday, the deadline shifts to the next business day.
As of mid-2025, the IRS now permits taxpayers to submit Form 15620 online via its website.
To file online: create or sign in to your IRS account (with ID.me multi-factor authentication), complete the form, and submit electronically.
Alternatively, you can still download the PDF form, sign it, and mail it to the IRS office with which you file your federal income tax return.
Important: Use only one method, either electronic submission or mail, to avoid confusion, delays, or duplicate filings.
Regardless of how you file, you must give a copy of the executed election (or a copy of the confirmation if filed online) to the person for whom the services were performed (e.g., employer), or to the transferee if different.
This ensures the company has a record and can adequately account for deductions or compliance matters.
Keep a copy of the signed Form 15620 (or confirmation of e-filing), proof of mailing or electronic receipt, and a copy of the election given to the company.
The IRS no longer requires you to attach the election to your tax return — but you should retain it in your files in case of IRS inquiry or audit.
Ensure the form was submitted within the 30-day window.
Verify your employer/issuer received their copy.
Store all documentation permanently (or at least until the statute of limitations has long passed).
Once you file:
This is critical — because when you eventually sell, the gains above this basis will generally be taxed as long-term capital gains (assuming holding period is satisfied), not ordinary income.
If you leave before full vesting, you forfeit unvested shares.
You do not get the taxes you paid on the 83(b) election refunded.
That’s the most significant risk of 83(b) — especially for non-founders or early employees whose tenure is uncertain.
If the company fails and the stock becomes worthless, the taxes you paid under 83(b) are lost.
You may be able to claim a capital loss when you dispose of the worthless stock, but that rarely offsets the ordinary income tax you already paid.
This risk is one reason 83(b) election decisions should be made carefully, not blindly.
One of the most powerful tax plays: combining 83(b) election with QSBS eligibility.
Because 83(b) moves the taxable event to the grant date, your QSBS 5-year holding period can begin immediately, rather than when shares vest.
If the company qualifies under QSBS rules, it can result in significant tax savings — especially if the company grows substantially before an exit.
Here are mistakes I see too often when advising founders, pre-IPO executives, and early employees:
Given today’s new filing process, the calculus is slightly easier — but the strategic questions remain as vital as ever.
Given the new form and e-filing option, you don’t necessarily need a lawyer to draft the 83(b) letter physically. But you should consult an advisor (tax or financial) if:
At VIP-level wealth advisory, we run 83(b) tax-scenario modeling, long-term gain projections, and liquidity assessments — and coordinate with your equity counsel to ensure the election aligns with your overall wealth plan.
The release of the official IRS Form 15620 and the availability of online filing make the 83(b) election process more user-friendly and less administrative hassle. But the substance of the decision — when it makes sense, when it doesn’t — remains unchanged.
When done correctly, the 83(b) election can turn ordinary income into long-term capital gains, significantly reduce your future tax burden, accelerate QSBS holding periods, and deliver decades of compounding wealth.
When done poorly — or without thoughtful planning — it can create burdensome upfront tax bills, liquidity stress, and permanent losses if the stock never vests or the company fails.
As with any high-stakes wealth decision, timing, strategy, and documentation matter more than ever.
At VIP Wealth Advisors, we take a holistic, scenario-based approach, modeling tax outcomes, liquidity, exit probabilities, QSBS fit, and aligning with your long-term wealth strategy.
If you’re considering an 83(b) election, the best time to act is now — before the 30-day clock starts ticking!
| Step | Action / Item | Notes |
|---|---|---|
| 1 | Determine the grant/transfer date of restricted stock or early-exercise | 30-day clock begins on actual transfer date |
| 2 | Complete IRS Form 15620 (or written election if appropriate) | Include name, TIN, address, property description, number of shares, FMV, restrictions, date transferred, taxable year |
| 3 | Decide filing method — electronic (preferred) or mail (only one)** | If e-filing: log into IRS online account → ID.me; submit form. If mailing: send to the IRS office where you file your tax return |
| 4 | File within 30 days of transfer (or next business day if deadline is weekend/holiday) | No extensions or exceptions |
| 5 | Provide a copy of the filed election (or confirmation) to your employer/issuer | Ensures company records match your election |
| 6 | Retain proof of filing, signed election, and employer copy | Save PDF/e-file confirmation or USPS certified-mail receipt + copy of the election |
| 7 | Confirm with the employer that they acknowledged receipt | Helps avoid compliance issues |
| 8 | Integrate with broader planning — QSBS, liquidity, exit timing, cash needs | Review with a tax advisor or wealth planner |
| 9 | Track vesting schedule, holding period, and future sale strategy | Use for long-term capital gain planning |
| 10 | Store election docs securely and indefinitely | IRS may require documentation many years later |
It’s a tax election that allows you to pay taxes on restricted stock now (at the grant date), instead of when it vests, often converting future growth into long-term capital gains.
Founders, early employees, or service providers who receive restricted stock (or early-exercised options) at low FMV and expect significant future appreciation.
Only if the Grant includes an early exercise clause. For standard unexercised options or RSUs, 83(b) generally doesn’t apply.
It’s the new, official election form the IRS released in November 2024 for making a Section 83(b) election. It standardizes required information and is the recommended way to file.
No, you may still file a compliant written election statement under the rules. That said, Form 15620 reduces the risk of omission, and using it is strongly recommended. IRS+1
Yes. As of mid-2025, the IRS permits electronic filing of Form 15620 via its website.
No — the electronic filing counts. In fact, the IRS instructs that you should use only one method — either e-file or mail — to avoid duplicate submissions.
Yes. Whether you e-file or mail, you must furnish a copy of the completed election to the employer or issuer (or transferee, if different).
Not necessarily. With Form 15620, attaching the election is no longer standard, but you should keep a complete record of the election and proof.
The election is invalid. You cannot retroactively file. Default Section 83(a) treatment will apply — i.e., you will be taxed as shares vest (likely at a higher value).
If your company qualifies and the stock meets QSBS requirements, then yes — filing Form 83(b) can start the QSBS 5-year holding period at the grant (not at vest).
Yes — once filed, you generally cannot revoke it (unless you get rare IRS consent).
If you are a founder, early employee, or tech executive staring at a 30-day clock, you do not have time for guesswork. A single decision here can shift hundreds of thousands of dollars from ordinary income to long-term capital gains.
We help you model the tax impact, evaluate company and liquidity risk, integrate QSBS, and align the 83(b) decision with your broader equity and wealth strategy.