83(b) Election Explained: Benefits, Risks, and How to File

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Key Takeaways

• Section 83(b) elections allow taxpayers to accelerate income recognition on restricted property, potentially locking in lower tax rates by starting the capital gains holding period earlier.
• The election must be filed within 30 days of the property transfer, and missing this deadline can result in significant tax disadvantages.
• A valid 83(b) election requires specific information and timely submission to the IRS, the employer, and, in some cases, attachment to the tax return.
• While 83(b) elections can offer substantial tax benefits, they also carry risks, especially if the property is later forfeited or declines in value.
• Recent IRS guidance and electronic filing options have streamlined the process, but strict compliance with procedural requirements remains essential.

What Is a Section 83(b) Election?

A Section 83(b) election is a provision under the Internal Revenue Code that allows individuals who receive property, most commonly restricted stock or partnership profits interests in connection with the performance of services, to elect to include the value of that property in their gross income at the time of transfer rather than waiting until the property becomes vested (i.e., when it is no longer subject to a substantial risk of forfeiture or becomes transferable)

Legal Framework:
Under Section 83(a), if you receive property (such as stock or a partnership interest) for services, you generally recognize income when your rights in the property are either transferable or not subject to a substantial risk of forfeiture, whichever comes first. The amount included in income is the fair market value (FMV) of the property at that time, minus any amount paid for the property.

Section 83(b) provides an alternative: you may elect to include the FMV of the property (less any amount paid) in income at the time of transfer, even if the property is not yet vested [1]. This election must be made within 30 days of the transfer .

Why Make the Election?
The main advantage is the potential to pay tax on a lower value if the property is expected to appreciate. By paying tax upfront, any subsequent appreciation is generally taxed as capital gain rather than ordinary income, provided the holding period requirements are met.

Why 83(b) Elections Matter for Equity and Profits Interest

Equity Compensation:
Section 83(b) elections are most commonly associated with restricted stock awards, but they are also relevant for other forms of property, including partnership profits interests. In the context of startups and private companies, employees and founders often receive equity that vests over time. Without an 83(b) election, the recipient is taxed on the FMV of the property as it vests, which could be much higher than its value at grant.

Profits Interest 83(b) Election:
A profits interest in a partnership (such as an investment fund or an operating company taxed as a partnership) is a right to share in future profits and appreciation, not in existing capital. If a profits interest is subject to vesting, a Section 83(b) election can be made to recognize any income at the time of grant, which is often zero or nominal, locking in a zero or low tax basis and starting the capital gains holding period [2].

Tax Planning Implications:

• Accelerating Income: If the property is expected to appreciate, paying tax on the lower initial value can result in significant tax savings.
• Capital Gains Treatment: Future appreciation is taxed at long-term capital gains rates (0%, 15%, or 20% in 2025, depending on income), rather than as ordinary income (which could be taxed as high as 37% in 2025).
• Holding Period: The holding period for capital gains begins at the time of transfer if an 83(b) election is made.

Risks:

• If the property is later forfeited (e.g., the recipient leaves before vesting), the taxpayer cannot recover the taxes paid on the initial inclusion, and no deduction is allowed for the forfeiture.
• If the property declines in value, the taxpayer may have paid more tax than would have been due if the election had not been made.

83b Election Form: What You Need Before Filing

Required Information:
To make a valid 83(b) election, you must provide the following details:

1. Taxpayer’s name, address, and taxpayer identification number (TIN).
2. Description of the property (e.g., number and class of shares, or description of partnership interest).
3. Date of property transfer and the taxable year for which the election is made.
4. Nature of the restrictions (e.g., vesting schedule, forfeiture conditions).
5. Fair market value at the time of transfer (without regard to any restrictions other than those that will never lapse).
6. Amount paid for the property, if any.
7. Amount to be included in gross income (FMV minus amount paid).
8. Statement that copies have been furnished to the employer or service recipient.

Form 15620:
Starting in late 2024, the IRS published Form 15620, a fillable PDF, to facilitate the 83(b) election process. This form captures all required information and can be downloaded from the IRS website [3].

Supporting Documentation:

• Stock or partnership agreement showing the terms of the grant.
• Valuation documentation supporting the FMV at the time of transfer.
• Proof of payment for the property, if applicable.

Electronic Filing:
Beginning in July 2025,  Form 15620 is now available to be filed electronically on the IRS website. Taxpayers must first sign in or create an account through the IRS’s secure ID.me login system. After accessing the portal, they will be prompted to answer a short series of questions to complete the form, with the option to submit it directly through the system or download and mail it to the IRS. While the updated form notes that electronic submission is the preferred method, taxpayers should choose only one filing method to avoid duplication. The online process includes a confirmation step where the taxpayer verifies that the form has not also been mailed. Upon successful submission, the IRS immediately provides an online receipt, and taxpayers can download or print a copy to share with their employer or service recipient.

83(b) Election 30 Days Rule: Deadlines & Timing

Strict 30-Day Deadline:
The 83(b) election must be filed with the IRS no later than 30 days after the date the property is transferred. This is a statutory deadline and is strictly enforced.

• No Extensions: The IRS does not grant extensions for this deadline, and missing it can result in the loss of potential tax benefits.
• Weekends and Holidays: If the 30th day falls on a Saturday, Sunday, or legal holiday, the election is considered timely if postmarked by the next business day [3].

How to File by mail:

You must mail the completed and signed 83(b) election either IRS Form 15620 or a compliant written statement to the IRS office where you file your federal tax return. Additionally, you must provide a copy of the election to your employer or service recipient. Previously common practice included attaching a copy to your federal tax return, but the IRS no longer imposes this requirement. As long as the IRS receives the original election within the 30-day deadline, the election remains valid. While attaching a copy to your return is not required, maintaining thorough records and following all documentation guidelines remains advisable for clarity and future reference.

Proof of Timely Filing:
Send the election via certified mail with return receipt requested to document timely submission.

What to Do Once the 83(b) Election Is Filed with the IRS

After Filing:

• Retain Copies: Keep copies of the filed election, proof of mailing, and all supporting documents for your records.
• Provide to Employer: Ensure your employer or the service recipient receives a copy, as they may need it for payroll and reporting purposes.
• Monitor Vesting and Forfeiture: If the property is later forfeited, you cannot claim a deduction for the previously included income, and any loss is limited to the amount paid for the property, not the amount included in income.
• Track Holding Period: The holding period for capital gains purposes begins on the date of transfer if the 83(b) election is made.

Employer Reporting:
Employers must report the value of the property as compensation on Form W-2 (for employees) or Form 1099-NEC (for independent contractors) in the year the income is recognized.

FAQ

Can I correct my 83(b) election form after submitting to the IRS?

Generally, an 83(b) election is irrevocable once made, except with the consent of the IRS. Revocation is only permitted in rare cases where there was a mistake of fact regarding the underlying transaction, not a mistake as to the value of the property or a change in circumstances. Requests for revocation must be made within 60 days of discovering the mistake.

Do I still need to mail a paper copy for my 83(b) election?

As of mid-2025, the IRS now permits taxpayers to file their Section 83(b) elections electronically using Form 15620 through the IRS website. This online filing option offers immediate confirmation of receipt and is the preferred method by the IRS.

What if I miss the 83(b) election 30 days deadline?

Missing the 30-day deadline means you cannot make the election, and you will be taxed under the default rules of Section 83(a) that is, you will recognize income as the property vests, potentially at a much higher value. The IRS does not grant extensions for this deadline, and late elections are not accepted.

Can I file the 83b IRS form on weekends or holidays?

If the 30th day after the property transfer falls on a weekend or legal holiday, the election is considered timely if it is postmarked by the next business day [3].

How do I check the status of my 83(b) election with the IRS?

To check the status of your Section 83(b) election with the IRS, you can call their toll-free number at 800-829-1040. Navigate through the automated system to speak with a representative who may be able to confirm receipt of your election. However, it’s important to note that the IRS does not always provide confirmation of receipt for 83(b) elections, so it’s advisable to retain proof of mailing, such as a USPS Certified Mail receipt, as evidence of timely filing.

Conclusion

Section 83(b) elections are a powerful tax planning tool for recipients of restricted stock, partnership profits interests, and other property subject to vesting. By accelerating income recognition, taxpayers can potentially lock in lower tax rates and start the capital gains holding period earlier.

Get Expert Advice

We can help you weigh the benefits and costs of an F reorganization versus other strategies. Because of our experience in guiding companies through this process, we will find a solution that works for you. Contact Zack Leder or call us at 770.396.2200 to learn more about tax planning and consulting services.

Cited sources

• [1]Sec. 83 Property transferred in connection with performance of services
• [2]Rev. Proc. 93-27
• [3]Instructions for Form 15620 (April 2025)

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