If you receive restricted stock or other property for services -- as a startup founder, early employee, or LLC member -- you will owe income tax on it. The question is when: at the time you receive it, or when it vests. A Section 83(b) election lets you choose to be taxed immediately, at the current (usually low) value, rather than waiting until the stock vests and is potentially worth far more. The catch: you have exactly 30 days from the grant date to file the election with the IRS. Miss that deadline by a single day and the option disappears permanently.

Warning

The 83(b) election has a 30-calendar-day deadline from the date of property transfer. There are no extensions, no late-filing exceptions, and no relief provisions. The IRS has no discretion to accept a late election. If you miss day 30, the option disappears permanently for that grant. Put the deadline on your calendar the day you sign the stock agreement.

## What Section 83(b) Actually Does

Under the default rule of IRC Section 83(a), when you receive property in exchange for services, you owe ordinary income tax on the difference between what you paid and the property's fair market value -- but only when the property is no longer subject to a "substantial risk of forfeiture." In plain terms, you are taxed when the stock vests, not when you receive it.

A Section 83(b) election reverses that timing. By filing the election, you tell the IRS: tax me now, at today's value, even though the stock has not vested yet.

Technical detail
IRC Section 83(b) permits a service provider to elect to include in gross income the fair market value of transferred property at the time of transfer, rather than at the time it vests.
Any future appreciation above that amount is not taxed as ordinary income. When you eventually sell, the gain receives capital gains treatment.

When It Saves Money: A Founder Example

The math is what makes this election famous in startup circles.

Sarah co-founds a company and receives 1,000,000 shares of restricted stock at $0.001 per share -- a total value of $1,000. The shares vest over four years. She files a Section 83(b) election within 30 days.

With the 83(b) election: Sarah owes income tax on $1,000 (the fair market value at grant minus the $0 she paid above that). At a 37% marginal rate, that is $370 in federal tax. Four years later, the stock has vested and is worth $10 per share. She sells for $10,000,000. Her taxable gain is $9,999,000, taxed at the long-term capital gains rate of 20% plus the 3.8% net investment income tax -- approximately $2,379,762.

Without the 83(b) election: Sarah pays no tax at grant. But as each vesting tranche hits, she owes ordinary income tax on the difference between what she paid and the stock's current value. If the stock is worth $10/share when a tranche vests, she owes ordinary income tax on $9.999 per share. Over four years, her ordinary income from vesting totals approximately $9,999,000, taxed at up to 37% -- roughly $3,699,630 in federal tax. She gets no capital gains rate benefit because the appreciation was taxed as compensation.

The 83(b) election saved Sarah approximately $1.3 million in federal taxes. The savings come from two sources: she locked in a tiny taxable amount at grant, and she converted what would have been ordinary income into long-term capital gains.

Founder receives 1,000,000 restricted shares at $0.001/share, stock reaches $10/share at vesting
Without Planning
No 83(b) Election Filed
  • No tax at grant
  • Taxed as ordinary income at each vesting tranche
  • $9,999,000 taxed at up to 37% federal rate
  • Total federal tax: ~$3,699,630
Result~$3,699,630 in federal taxes
With Planning
83(b) Election Filed Within 30 Days
  • $1,000 taxed as ordinary income at grant ($370 tax)
  • No additional income at vesting
  • $9,999,000 gain taxed at 20% LTCG + 3.8% NIIT at sale
  • Total federal tax: ~$2,380,132
Result~$2,380,132 in federal taxes (saving ~$1.3M)
## When It Does NOT Save Money

The election is a bet that the stock will increase in value. If it does not, you lose.

If Sarah's company fails and the stock becomes worthless, she paid $370 in tax on property she never benefited from. She cannot get that tax back.

Technical detail
Under IRC Section 83(b), if property is subsequently forfeited after an election is made, no deduction is allowed in respect of the forfeiture.
She can claim a capital loss on the amount she paid for the stock (here, essentially zero), but the income tax she paid on the election is gone.

The election also backfires if you leave the company before your stock vests. Unvested shares are typically forfeited back to the company. You paid tax on something you no longer own, and you do not get a refund of the tax. The forfeiture rules under Treasury Regulation 1.83-2(a) limit any loss to the excess of the amount paid for the property over the amount received upon forfeiture.

For early-stage founders receiving stock at fractions of a penny, the downside risk is usually trivial -- $370 on a million shares at $0.001 each. The calculus changes when the stock already has meaningful value at grant. An employee receiving $200,000 worth of restricted stock would owe roughly $74,000 in tax immediately, with no guarantee the stock will be worth more at vesting.

What Property Qualifies (and What Does Not)

The 83(b) election applies to property transferred in connection with the performance of services that is subject to a substantial risk of forfeiture. In practice, this means:

Eligible:

  • Restricted stock awards (the most common use case)
  • Early-exercised stock options (when you exercise before vesting, the resulting shares are restricted property)
  • LLC and partnership profits interests (practitioners routinely file protective 83(b) elections on profits interests, even though Revenue Procedure 93-27 and Revenue Procedure 2001-43 provide a safe harbor treating the grant as a non-taxable event -- the protective election serves as a fallback if the IRS later disagrees)

Not eligible:

  • Stock options themselves -- you cannot file an 83(b) election on the grant of an ISO or NSO; the election only applies to property you already own, not the right to purchase property in the future
  • RSUs (restricted stock units) -- because RSUs are a promise to deliver shares in the future, not a transfer of property, Section 83(b) does not apply until the shares are actually delivered, at which point they are typically already vested

The distinction matters: restricted stock awards transfer actual shares to you at grant (subject to vesting), while RSUs are a contractual right to receive shares later. Only the former triggers a Section 83(b) opportunity.

The 30-Day Deadline

The deadline is 30 calendar days from the date the property is transferred to you. Not 30 business days. Not 30 days from when you learned about the election. Not 30 days from when your lawyer got around to telling you about it.

Technical detail
Treasury Regulation 1.83-2(b) requires the election to be filed not later than 30 days after the date the property was transferred.

There are no extensions, no late-filing exceptions, and no relief provisions. The IRS has no discretion to accept a late election. Tax courts have consistently upheld this -- if you miss day 30, the election is permanently unavailable for that grant.

The election is also irrevocable once made.

Technical detail
Treasury Regulation 1.83-2(f) provides that an election may not be revoked except with the consent of the Commissioner, which is granted only when the person who made the election is under a mistake of fact as to the underlying transaction.
A change of mind about whether the stock will appreciate is not a mistake of fact.

How to File

Filing Your 83(b) Election
1
Receive Restricted Property
Day 0
The 30-day clock starts on the date of transfer -- typically the grant date on your stock purchase agreement or the exercise date if you early-exercised options.
2
Complete Form 15620
Days 1-15
Fill out the form with your name, TIN, property description, transfer date, FMV, amount paid, and the nature of the restrictions. Do not wait until the last minute.
3
File with the IRS
Before Day 30
Submit electronically via your IRS online account (preferred -- provides instant confirmation) or mail to the IRS office where you file your return using USPS Certified Mail with return receipt.
4
Send Copy to Employer
Before Day 30
Provide a copy of the filed election to the company for which you perform services.
5
Keep Records
Ongoing
Retain the IRS confirmation or certified mail receipt, a copy of the election, and the stock purchase agreement. You are no longer required to attach the election to your tax return, but keep everything in your files.
As of 2025, the IRS offers two filing methods.

Electronic filing (preferred by the IRS): Create an IRS online account, complete Form 15620 on the IRS website, and submit electronically. You receive a downloadable confirmation. This method provides immediate proof of timely filing.

Mail filing: Complete Form 15620 (or a written statement containing the same information) and mail it to the IRS office where you file your return.

Technical detail
Treasury Regulation 1.83-2(c) specifies the required content of the election statement: taxpayer name, address, and TIN; description of the property; date of transfer; taxable year; nature of restrictions; fair market value at transfer; and amount paid.

Form 15620 requires:

  1. Your name, TIN, and address
  2. Description and quantity of the property (e.g., "1,000,000 shares of Class A common stock of XYZ Inc.")
  3. Date the property was transferred
  4. Taxable year for the election
  5. Nature of the restrictions (e.g., "four-year vesting with one-year cliff")
  6. Fair market value per unit at time of transfer
  7. Amount paid per unit
  8. Total amount included in gross income
  9. Name, TIN, and address of the company (service recipient)

You must also provide a copy of the election to the company for which you perform services.

Technical detail
Treasury Regulation 1.83-2(d) requires the person making the election to submit a copy of the statement to the person for whom services are performed.

Since 2016, you are no longer required to attach a copy of the election to your income tax return, though keeping a copy in your records is essential.

Restricted Stock Awards
The most common use case -- actual shares transferred at grant, subject to vesting. Eligible for 83(b).
Early-Exercised Options
When you exercise before vesting, resulting shares are restricted property. Eligible for 83(b). Clock starts at exercise date.
LLC Profits Interests
File a protective 83(b) even if safe harbor applies. Costs nothing if safe harbor holds; prevents large tax bill if IRS challenges it.
RSUs (Not Eligible)
RSUs are a promise to deliver shares later, not a transfer of property. Section 83(b) does not apply until shares are delivered, at which point they are typically already vested.
Stock Options (Not Eligible)
You cannot file 83(b) on the grant of an ISO or NSO -- only on property you already own, not the right to purchase it.
## Common Mistakes

Missing the 30-day deadline. This is the most consequential mistake and it is irreversible. The deadline runs from the date of transfer -- typically the grant date shown on your stock purchase agreement. Founders who are busy incorporating, hiring, and fundraising sometimes let this slip. Put it on your calendar the day you sign the stock agreement.

Not keeping proof of timely filing. If you file by mail, use USPS Certified Mail with return receipt requested. The postmark on the certified mail receipt is your proof of timely filing. Without it, the IRS can assert you filed late, and you will have no evidence to the contrary. Electronic filing eliminates this concern by generating a timestamped confirmation.

Not sending a copy to the company. The regulations require it. While failure to provide a copy to the employer does not invalidate the election, it creates compliance issues and may cause problems if the company reports your income differently than you do.

Filing on the wrong property. The election applies to restricted stock, not stock options. Filing an 83(b) election on an option grant is meaningless -- there is no property to elect on until you exercise the option and receive actual shares.

Ignoring the election for profits interests. LLC members who receive profits interests often skip the protective 83(b) election because the safe harbor under Revenue Procedures 93-27 and 2001-43 treats the grant as non-taxable. But the safe harbor has conditions, and if the IRS later determines those conditions were not met, the absence of an 83(b) election means the interest will be taxed at vesting -- potentially at a much higher value.

Tip

For early-stage founders receiving stock at fractions of a penny, the downside risk of filing an 83(b) is trivial -- often under $500 in tax. The upside can be measured in hundreds of thousands or millions of dollars. The calculus changes when the stock already has meaningful value at grant: an employee receiving $200,000 worth of restricted stock would owe roughly $74,000 immediately, with no guarantee the stock will be worth more at vesting. Always model the numbers before filing.