An 83(b) election is a tax filing with the IRS that lets you pay income tax on equity at its current (low) value rather than its future (potentially much higher) value when it vests.
The 83(b) election might be the most important tax filing you’ve never heard of.
Miss it, and you could owe tens of thousands in taxes on equity you can’t even sell. File it correctly, and you lock in a tax bill of nearly zero.
This isn’t about ownership percentages or cap tables. It’s about when the IRS taxes you on the equity you receive.
What Is an 83(b) Election?
Section 83 of the tax code covers property received as compensation. When you get equity for your work, the IRS wants to tax you on it.
The question is: when?
How Vesting Works: The Complete Guide
Without an 83(b) election: You get taxed when the equity vests, based on its value at that time.
With an 83(b) election: You get taxed now, based on today’s value.
That’s it. The 83(b) is a timing election. You’re telling the IRS: “I want to pay taxes on this equity now, at its current value, not later when it might be worth a lot more.”
The 83(b) has nothing to do with ownership percentage. It’s purely about when you pay taxes.
Why 83(b) Elections Matter: A Real Example
Here’s where it gets concrete.
| Scenario | Without 83(b) | With 83(b) |
|---|---|---|
| You receive equity worth $1,000 today | — | Pay tax on $1,000 now |
| It vests in 4 years, now worth $100,000 | Pay tax on $100,000 as ordinary income | Already handled at grant |
| You sell later for $150,000 | Capital gains on $50,000 | Capital gains on $149,000 |
| Total tax burden | High (ordinary income on $100K) | Low (ordinary income on $1K) |
Without the 83(b), you pay ordinary income tax rates (up to 37%) on $100,000 at vesting. That’s potentially $37,000 in taxes on equity you might not be able to sell yet.
With the 83(b), you paid ordinary income tax on $1,000 at grant. Everything else qualifies for capital gains treatment (up to 20%).
The difference could be $20,000 or more in taxes.
When Does 83(b) Apply?
The 83(b) election applies whenever you receive property as compensation for services and that property is subject to vesting or other restrictions.
Common scenarios:
- Restricted stock grants in a startup
- Founder shares with vesting schedules
- Profits interests in an LLC (more on this below)
- Co-founder equity with a cliff
If your equity vests over time, the 83(b) election is probably relevant. Understanding different types of startup equity helps you know which ones require an 83(b).
The 30-Day Deadline
Here’s where most people get burned.
You must file the 83(b) election within 30 days of receiving the equity.
Not 30 business days. Not 30 days from when you sign the agreement. 30 calendar days from the grant date.
Miss this deadline, and there’s no fix. No extensions. No exceptions. The opportunity is gone.
The 30-day rule is absolute. Set a calendar reminder the day you receive any restricted equity.
How to File an 83(b) Election
As of July 2025, you can file electronically — and the IRS says it’s their preferred method. This is a real improvement. You get instant confirmation instead of hoping a certified mail envelope arrived before the deadline.
Old vs. new
| Before | Now |
|---|---|
| Write your own election letter | Use standardized Form 15620 |
| Mail via certified mail | File online through IRS portal |
| Hope it arrives in time | Get instant confirmation |
| Keep certified mail receipt as proof | Download PDF confirmation |
| 3-5 days for delivery | Immediate |
Electronic filing: step by step
1. Create an IRS account
You’ll need to set up an account through ID.me, the IRS’s identity verification system. This takes 10-15 minutes and requires a government ID.
Do this in advance. Don’t wait until day 29 of your 30-day window to discover you need to verify your identity.
2. Access the Form 15620 portal
Log into your IRS account and navigate to the 83(b) election filing page. The online version walks you through a series of questions rather than presenting a blank form.
3. Complete the form
You’ll need your Social Security number, a description of the property (e.g., “1,000 shares of Common Stock in XYZ Inc.”), the date of transfer, the fair market value at transfer, and the amount you paid.
The form also asks you to confirm you haven’t already filed this election by mail. Don’t file both ways. Choose one method and stick with it.
4. Submit and download confirmation
After submitting, download or print the confirmation page immediately. This is your proof of filing.
5. Provide a copy to your employer
This requirement hasn’t changed. Send the company that issued the equity a copy of the filed form.
Two quirks founders should know
When the portal first launched, it had two limitations — both now fixed, but worth understanding.
The decimal place problem (fixed). The original system only accepted share prices to two decimal places. Startup stock is often priced at fractions of a penny — a $0.0001 per share price is common for early-stage founder shares. The IRS updated the system to allow up to four decimal places.
The share quantity cap (also fixed). The original system capped entries at 999,999 shares. Founders receiving millions of shares couldn’t accurately report their grants. The portal now accepts up to 99,999,999.99 shares.
When to use paper filing instead
Electronic filing works for most situations, but consider paper if:
- Your situation is complex. Partnership equity, profits interests with unusual structures, or grants that don’t fit neatly into Form 15620’s questions might be better served by a custom election letter.
- Your tax advisor has a preferred format. Some attorneys and accountants have developed their own 83(b) election letters over years of practice. That’s still valid.
- You can’t verify your identity. If you run into issues with ID.me, don’t let it cause you to miss the deadline. Switch to paper immediately.
The 30-day deadline is absolute. If you’re having trouble with the online system, mail it instead rather than risk missing the window.
What to include (either method)
- Your name and address
- Your Social Security number
- Description of the property (e.g., “1,000 shares of Common Stock in XYZ Inc.”)
- The date you received the property
- The fair market value at the time of transfer
- The amount you paid for it (often $0)
- A statement that you’re making the election under Section 83(b)
Special Case: Profits Interests in LLCs
Here’s where it gets interesting for LLCs using dynamic equity.
Profits interests are a form of LLC equity that only entitle you to future appreciation. If the company liquidated the day you received it, you’d get nothing.
That means a properly structured profits interest has a fair market value of $0 at grant.
So when you file the 83(b):
- Fair market value: $0
- Amount paid: $0
- Tax due: $0
You’re filing paperwork that results in zero tax. Why bother?
Three reasons:
-
Safe harbor protection. IRS Revenue Procedure 2001-43 says you don’t need to file an 83(b) for qualifying profits interests. But if your interest doesn’t quite meet the safe harbor requirements, the 83(b) is your backup.
-
Capital gains clock starts. The 83(b) election starts your holding period for long-term capital gains treatment. File it, and you’re closer to the one-year threshold.
-
Audit protection. If the IRS ever questions whether your profits interest was properly structured, the 83(b) documents that you reported it at grant with a $0 value.
Most attorneys recommend filing a “protective” 83(b) for profits interests. There’s no downside, and it covers you if something goes wrong.
83(b) for Dynamic Equity
If you’re using dynamic equity in an LLC, here’s how the 83(b) fits in.
When someone joins your team and receives a profits interest, they file an 83(b) election. The election covers their interest in the LLC, not a specific percentage.
As contribution points change and percentages shift, no new 83(b) is needed. The original election covers the ongoing interest. The operating agreement defines what that interest entitles them to, and it can include dynamic, formula-based calculations.
| What the 83(b) covers | What it doesn’t cover |
|---|---|
| Tax timing on the equity grant | Your ownership percentage |
| Starting the capital gains clock | Future changes to allocation |
| Documentation of $0 value at grant | How profits are divided |
The percentage you’re entitled to is defined by the operating agreement, not the 83(b). The 83(b) just handles the tax timing question.
Common 83(b) Mistakes
Missing the deadline. This is the big one. Set multiple reminders. Have your lawyer or accountant remind you. Treat this like a flight you can’t miss.
Forgetting to file with the IRS. Some founders think signing the election is enough. You have to actually mail (or e-file) it to the IRS.
Not keeping copies. You’ll need to attach a copy to your tax return. Keep several copies in multiple places.
Filing when you shouldn’t. If you’re receiving fully vested shares with no restrictions, the 83(b) doesn’t apply. You’ll just confuse the IRS.
Filing for the wrong entity type. The 83(b) applies to LLCs taxed as partnerships and C-Corps. If your company is taxed differently, the rules may vary.
When NOT to File an 83(b)
The 83(b) isn’t always the right move.
Don’t file if:
- The equity is already fully vested with no restrictions
- You paid full fair market value for the shares
- You’re highly confident the company will fail and the equity will be worthless
- You can’t afford the tax bill now (though for most early-stage equity, this isn’t an issue)
The biggest risk of filing an 83(b) is paying taxes on equity that ends up worthless. If you file an 83(b) on $10,000 worth of stock and the company fails, you paid taxes on something worth zero. You can’t get that back.
For most startup scenarios, though, the upside far outweighs this risk.
Quick Reference: 83(b) Checklist
| Step | Timing | Notes |
|---|---|---|
| Receive equity grant | Day 0 | Calendar the deadline immediately |
| Set up IRS/ID.me account | Days 1-3 | Don’t wait until the last minute |
| Complete Form 15620 online | Days 3-10 | Or prepare paper filing |
| Submit electronically | By Day 25 | Leave buffer for issues |
| Download confirmation | Immediately | Save in multiple places |
| Send copy to employer | Within 30 days | Email is fine |
| Deadline expires | Day 30 | No extensions |
| Attach copy to tax return | Tax filing deadline | For that tax year |
Frequently Asked Questions
Do I need to file an 83(b) for stock options?
No. Stock options aren’t subject to 83(b) because you don’t own the underlying shares yet. The 83(b) applies when you exercise those options and receive restricted stock. At that point, you have 30 days to file. If you hold ISOs, exercising early when the spread is small is also one of the best ways to limit AMT exposure — the 2026 changes to AMT phaseout thresholds make this strategy more valuable than ever.
What if I paid nothing for my shares?
That’s fine. Report the amount paid as $0. The 83(b) still applies if the shares are subject to vesting or other restrictions.
Can I still file by mail?
Yes. Electronic filing is optional. You can still mail Form 15620 or a custom election letter to the IRS. Just don’t file both ways for the same grant.
What if I already mailed my 83(b) election?
Don’t file again electronically. One submission per grant. Filing twice will create confusion and potential delays.
Can I revoke an 83(b) election?
No. Once filed, the election is irrevocable. That’s why it’s important to understand what you’re doing before you file.
What happens if I miss the 30-day deadline?
You lose the ability to make the election. There’s no extension or workaround. You’ll be taxed at vesting based on the fair market value at that time.
The Bottom Line
The 83(b) election is a one-time filing that can save you thousands in taxes. It’s especially valuable for early-stage founders and employees receiving equity when the company is worth very little.
The rules are simple:
- File within 30 days
- Report the fair market value at grant
- Keep copies
Don’t overthink it. Don’t miss the deadline. And if you’re receiving equity in a new venture, make this the first administrative task you handle.
Tracking equity across your team? Equity Matrix helps you manage dynamic contributions and generates the documentation your accountant needs. Try the calculator to see how fair equity splits work.
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Get Started FreeThis article is for informational purposes only and does not constitute legal, tax, or financial advice. Equity Matrix is not a law firm, accounting firm, or financial advisor. Consult a qualified professional for guidance specific to your situation.
Co-founder, Equity Matrix
Sebastian writes about startup equity, founder dynamics, and building fair partnerships.
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