If you receive founder stock that vests over time, an 83(b) election lets you choose to be taxed on its value now, when it is usually worth very little, instead of as it vests, when it may be worth much more. The deadline is strict, and missing it is one of the most common problems found in early-stage diligence.
How it works
Normally, restricted stock is taxed as it vests, based on its value at each vesting date. If the company grows, each tranche is taxed at a higher value, as ordinary income, even though you have not sold anything.
An 83(b) election, under Section 83(b) of the Internal Revenue Code, tells the IRS you want to include the stock's value in income at the time it is granted instead. For founders buying shares at a nominal price at formation, that amount is often close to zero. It also starts the capital gains holding period at grant.
The deadline
You have 30 days from the date the stock is transferred to you to file. Late elections are not permitted.1 There is no extension, so file as soon as the stock is issued.
How to file
- The IRS introduced Form 15620 for 83(b) elections in late 2024, and updated it in 2025 so it can be filed online through the IRS website.1
- Online filing requires signing in to an IRS account through ID.me, and gives you an online confirmation of the submission.1
- You can still file by mail. If you do, use certified mail with return receipt so you can prove the date.
- Give a copy to the company.1 Keep your own copy and proof of filing permanently.
What diligence will check
- A copy of each founder's filed 83(b) election, with proof of the filing date.
- That the election matches the stock purchase agreement: number of shares, date and price.
- For employees who early-exercised options, that they filed too.
An 83(b) election is not right for every situation. Talk to a tax advisor before you file, and do it within 30 days.