83(b) deadline warning

A startup stock grant can trigger a tax decision that expires in 30 days: file an 83(b) election on time, or the Internal Revenue Service taxes the shares later as they vest. (irs.gov) Section 83(b) applies to restricted stock or other property transferred for services while it is still subject to vesting conditions, which tax law calls a “substantial risk of forfeiture.” Without the election, the default rule is ordinary income at vesting based on the shares’ fair market value then, not when you received them. (irs.gov) The filing deadline is strict: Form 15620 says the election must be filed no later than 30 days after the transfer date, with only a next-business-day rule when day 30 falls on a weekend or legal holiday. Revenue Procedure 2012-29 uses the same 30-day standard for a valid election. (irs.gov 1) (irs.gov 2) The tax logic is simple. An employee who buys or receives low-value founder or early-stage shares can choose to recognize little or no ordinary income up front, then have later appreciation taxed under capital-gains rules if the stock is eventually sold. (schwab.com) (carta.com) That timing matters most at startups because common stock can be worth pennies at grant and much more by each vesting date. Carta says missing the filing can lead to “large tax savings” being lost, and Charles Schwab says the election is most relevant when relatively low-priced shares may rise sharply before vesting. (carta.com) (schwab.com) The election does not apply to every kind of equity. Revenue Procedure 2012-29 notes that Section 83 does not apply to an option without a readily ascertainable fair market value at grant, and startup lawyers and equity platforms generally distinguish restricted stock and some early-exercised options from standard restricted stock units, or RSUs. (irs.gov) (carta.com) The paperwork changed recently. The Internal Revenue Service now provides Form 15620, revised in April 2025, to make the election on an official form instead of relying only on a custom statement that tracks Treasury rules. (irs.gov) The filing also carries risk. If you elect early and the shares later lose value or are forfeited, you may have paid tax up front on stock that never produces a gain, a trade-off tax advisers routinely flag in 83(b) guidance. (schwab.com) (rsmus.com) The practical problem is that the deadline is tied to the transfer date, not to a financing round, a vesting date, or next year’s tax return. For employees and founders signing stock purchase papers, the tax bill can turn on whether one IRS form was sent within a single month. (irs.gov) (247wallst.com)