This guide explains the federal income tax consequences of a §83(b) election for a founder who receives restricted stock.
It also explains the rules for making the election: the deadline, what the election must say and how to file it.
It covers federal tax only. In general, most states’ income tax laws (including California and New York) give effect to a federal §83(b) election and do not require a separate state filing.
This guide is general information and is not legal or tax advice. Consult a tax lawyer for advice specific to your situation.
No. An unfunded, unsecured promise to deliver stock later is not property.
When the shares are delivered
No
Phantom stock and stock appreciation rights
No. An unfunded, unsecured promise to pay later is not property.
When you are paid
No
Cash
No. Money is not property under Section 83.
When you are paid
No
This guide uses restricted stock as its example, for simplicity. Other property, such as a partnership or LLC interest, can also be Section 83 property.
When property is vested
Property is vested for federal income tax purposes when it is no longer subject to a substantial risk of forfeiture.
So what is a substantial risk of forfeiture? A future condition, such as continued service or a performance milestone, that you must satisfy to own the property outright.
Usually the condition is substantial future work. That is called a service condition. A standard time-based vesting schedule is a common example.
Ask the clerk to postmark your receipt. A machine postmark can show a later date.
The IRS signs or stamps the return receipt, and the Postal Service returns it to you. It proves your election arrived, and when.
Online, you receive a success screen and a download. The IRS has not said you can retrieve either one later.
Years later, investors and buyers will ask you to prove that you filed on time.
A letter also handles special situations the form does not: multiple grant dates, no U.S. taxpayer identification number, or a protective election.
SAN FRANCISCO CAOCT 20 202694105
Certified mail receiptpostmarked by the clerkProves the mailing date
RECEIVEDOCT 23 2026IRS OGDEN
Return receiptstamped at the IRSProves the IRS received it
Your signed copyexactly what you sentProves what it said
Years later“Show us your §83(b) election.”Everything is in the file.
A letter handles several grants, no U.S. taxpayer identification number and protective elections. The form is optional. Many firms now prefer online filing for a simple grant. Why we still recommend mail.
Form 15620 or your own letter
A letter is valid if it is signed, states that it is made under §83(b), and includes the seven required items.
The form adds items the regulations do not require, such as a penalties-of-perjury statement and company details.
Either way, the seven required items make the election valid, not the form.
What the regulations requireOn Form 15620
Your name, address and SSN or ITINBox 1
A description of the stockBox 2
The date of transfer and the tax yearBoxes 3 and 4
The restrictions (the vesting terms)Box 5
Its fair market value, ignoring the vestingBox 6
The amount you paidBox 7
A statement that copies were furnishedAbove the signature, as a promise
Extra on the form
The amount of incomeBox 8
The company’s name and taxpayer identification numberBox 9, optional
A penalties-of-perjury statementAbove the signature
Election letter template
,
Department of the Treasury Internal Revenue Service [the IRS office for your state]
Election under Section 83(b) of the Internal Revenue Code
The undersigned taxpayer hereby elects, under Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in gross income as compensation for services the excess, if any, of the fair market value of the property described below over the amount paid for that property.
1.Taxpayer. The name, address and taxpayer identification number of the undersigned are: ; , , ; none (the undersigned is a nonresident alien individual who has not been issued a U.S. taxpayer identification number).
2.Property.
3.Date of transfer and taxable year. The property was transferred on . This election is made for .
4.Restrictions.
5.Fair market value. The fair market value of the property at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, was $ per share, or in total.
6.Amount paid. The amount paid for the property was $ per share, or in total.
7.Amount included in income. The amount to include in gross income is .
8.Protective election. The undersigned takes the position that . This election is made protectively, in case the property is treated as substantially nonvested property transferred in connection with the performance of services.
9.Holder. The property was issued to , in connection with services performed by the undersigned.
The undersigned is the person who performed the services in connection with which the property was transferred. Copies of this statement have been furnished to and to .
Date:
Your own signed statement
Your answers carry over to Form 15620 on the next slide, and back. Type over any underlined text, and switch on the paragraphs you need.
It follows the IRS’s own sample election, brought up to date. Click any paragraph for a note on it.
Where it goes
The IRS office where you file your tax return. The letter fills it in from your state: Austin, Kansas City or Ogden, or Austin’s international address if you live abroad.
State that it is a §83(b) election
The regulations require the election to state that it is made under §83(b). This sentence follows the wording of Form 15620.
Item 1. You
You make the election, even if the shares were issued to a trust or holding company. Use your SSN or ITIN. If you have neither, switch on “No SSN or ITIN” and read first.
Item 2. The stock
The number and class of shares and the company’s full legal name. A letter can cover more than one grant, as long as it is filed within 30 days of each transfer.
Item 3. The date and year
The date of transfer starts your 30 days. Use the calendar year of that date.
Item 4. The vesting terms
Who can repurchase the shares, at what price, and when each portion vests, including any that vest on day one. Include any acceleration. A letter has no length limit.
Item 5. Fair market value
The value per share on the date of transfer, determined as if there were no vesting. The long phrase about restrictions is the statute’s wording.
Item 6. Amount paid
Per share and in total. If you paid with property, its value counts. Services do not count. If co-founders who contribute only services receive more than 20% of the stock, a property contribution can be taxable.
Item 7. The income
Item 5 total minus Item 6 total. The regulations do not require this line, but the IRS sample and Form 15620 both include it.
A protective election
For when you believe no election is needed, for example because your vesting may not be a substantial risk of forfeiture, or because you hold an LLC profits interest, but you want one on file in case that position fails. Use the shares’ value on the date of transfer, not par value. The same 30 days apply.
Shares issued to a trust or holding company
You still make the election. The regulations require a copy to go to the holder of the shares, and this letter says so.
“Copies have been furnished”
Give the company its signed copy before you mail the original, so the statement is true when you file. Keep a record, such as the email you sent it with.
Sign it
The regulations require your signature. The IRS accepts an electronic signature on a paper election, such as a DocuSign signature or a scanned one. You still mail the signed paper. Date it the day you sign.
Form 15620, the IRS election form
This is the actual IRS form.
Click any box to see what to enter. Everything you type stays in your browser.
When you finish, download the completed PDF, print it, sign it and mail it. Or enter the same answers in the online version.
Box 1. You
Your legal name, Social Security number (or ITIN) and home address.
You make the election even if the shares were issued to your trust or holding company. That trust or company receives a copy, as does the company that issued the stock.
If you have no SSN or ITIN, read first.
Box 2. The stock
The number and class of shares and the company’s full legal name. For example: “4,000,000 shares of common stock of Acme Robotics, Inc.”
Shares transferred on two dates? Each transfer has its own 30 days. Use one form per date, or one letter filed in time for both.
Box 3. The date of transfer
The date the shares were transferred, as MM/DD/YYYY. For founder stock, usually the date you signed the stock purchase agreement.
Your 30 days count from this date.
Box 4. The tax year
“Calendar year 2026,” using the year of the Box 3 date.
Box 5. The restrictions
The company’s right to repurchase unvested shares if you leave, the repurchase price, and the vesting schedule.
Copy it from your stock purchase agreement. The box on the paper form holds about six lines. A letter has no limit.
Box 6. Fair market value
The value of one share on the Box 3 date, the number of shares, and the total.
Determine the value as if there were no vesting. At formation, it is usually the price you paid. After a funding round, a 409A valuation that reflects the round is the usual evidence, but the IRS can still disagree.
Box 7. Amount paid
The price per share, the number of shares, and the total.
If you paid with intellectual property or other property, its value counts as the amount paid. Services do not count. If co-founders who contribute only services receive more than 20% of the stock, a property contribution can be taxable. Paying with a promissory note? See .
Box 8. The income
Box 6 total minus Box 7 total. For most founders, $0.
A $0 election is still valid, and it is what keeps your vesting dates from being taxed.
Box 9. The company (optional)
The company’s name, EIN and address, if you choose.
The regulations do not require it, and the instructions say you may leave it blank.
Sign and date
Sign it by hand or electronically, and date it.
The form states that you will give the company a copy. Do so the same day, then mail the original by certified mail.
The company’s copyA signed copy before you mail, and your postmarked receipt the same day. Keep a record, such as the email.
A copy for your trust or holding companyOnly if it holds the shares.
Your fileThe signed election, the postmarked receipt, the return receipt and the valuation you used. Or the IRS download, if you filed online. Keep your own set even if someone else mailed it.
How longUntil the IRS can no longer assess tax for the year you sell, usually three years after you file that year’s return. For worthless stock, seven years from that year’s due date, your time to claim the loss.
Nothing goes with your tax return
What a missed deadline means
The 30-day deadline is set by statute, and the IRS cannot extend it.
Only a weekend or legal holiday, IRS disaster relief or service in a combat zone moves it.
You still have options: pay tax on today’s value; give up the shares; or argue that no election was needed.
Day 30On time
Day 31No effect
Weekend or holiday
The deadline moves to the next business day.
Mailed on time
The postmark date counts, if you can prove it.
A disaster
If the IRS grants relief for your area, you have more time.
Options after a missed deadline
Missed the 30 days? Every option takes one of three paths.
Pay tax on today’s value: keep your stake, and pay the tax now or as it vests. Later growth is capital gain.
Give up the shares: no tax now, but you give up the growth so far.
Or argue that no election was needed. Both arguments turn on the facts, and the company’s records have to match.
Doing nothing means tax at every vesting date.
1
Pay tax on today’s value
Accelerate the vesting
Taxed now: today’s value, minus your price
Recapitalize
Taxed at vesting: about today’s value
2
Give up the shares
Trade the shares for options
Taxed now: nothing
Cancel the unvested shares
Taxed now: nothing, but the shares are gone
3
Argue no election was needed
The shares were vested from the start
Taxed now: nothing, if the argument holds
The shares were never issued
Taxed now: today’s value, minus what you pay
Do nothing
You are taxed at every vesting date, at that day’s value.
$8,824,601 of ordinary income in the example
Each transaction covers only vesting after its date. Earlier vesting dates stay taxed, and missed payroll withholding on them has to be corrected. You need the company, and usually your investors, to agree.
Pay tax on today’s value: accelerate or recapitalize
Same example. This time, you missed the 30 days.
Accelerate the vesting: all your shares vest today, and you are taxed once, on today’s value minus what you paid.
Or make the shares transferable, a synthetic §83(b) election: the same tax today, and the company can buy back shares you keep.
Either way, no vesting date after today is taxed, and later growth is capital gain when you sell.
Pay the tax in cash or with shares the company buys back. Or pay the rest of today’s value with a note.
Or recapitalize: your unvested common becomes preferred stock frozen at today’s value, still vesting. You buy new common for future work.
You are taxed on about $479,600 as the preferred vests. A timely §83(b) election makes the new common’s growth capital gain.
Acceleration works under the statute. No IRS ruling or court case has approved the transferability version or the recapitalization.
Slide to pick a different month.
Stock purchase agreement
Your shares vest over four years, after a one-year cliff.
All of your shares are vested today.
Or, for the same tax:
Unvested shares cannot be transferred.
You can sell the shares, and the buyer takes them free of the repurchase right.
How to pay for it
SharesYou pay
You pay $177,452 of income tax at 37%, plus Social Security and Medicare if you are an employee. You keep all 4,000,000 shares.
Owe no tax: pay the rest of today’s value, $479,600, with a recourse note at the applicable federal rate or more. Untested: no ruling covers it.
The company buys back1,478,767 shares at $0.12 to cover the income tax. You keep 2,521,233, but they no longer qualify as QSBS, and investors’ shares can lose it too.
The company buys back1,478,767 shares at $0.12 to cover the income tax. You keep 2,521,233. The buyback is small enough to leave QSBS alone.
The company buys back1,478,767 shares at $0.12 to cover the income tax. You keep 2,521,233, but 2,521,233 of them no longer qualify as QSBS.
Today’s value is what you paid, so there is no tax to cover.
Recapitalization
Preferred stockTakes the place of your 4,000,000 unvested shares. Worth $480,000, with a fixed dividend and no share in growth. It keeps your vesting.
Ordinary income as it vests: about $479,600
New commonHolds the growth. You buy it at its value, which is low because the preferred is paid first, and file a timely §83(b) election.
Taxed now: its value, minus what you pay
October 15, 2026: $479,600 of ordinary income, instead of $8,824,601
todayLabel
The fix
oneTime
Ordinary income on the fix date
frozeTotal
Ordinary income as the preferred vests: {income} in all
frozeDetail
each batch at {fmv} a share, frozen on the fix date
valueTitle
Fair market value of a share
incomeTitle
Ordinary income on each vesting date
payrollTitle
Ordinary income, and the tax withheld
issued
You receive the stock
cliff
One year
vestedLabel
shares vested
incomeLabel
ordinary income
taxLabel
federal tax at
soldLabel
shares sold to pay it
electLabel
Ordinary income on day one
electDetail
{value} fair market value minus {paid} paid
saleLabel
You sell
saleGain
capital gain
saleGrowth
on growth from {from} to {to} a share
hpStart
Your holding period starts on day one
hpLong
Long-term after a year
perMonth
a month
fixDetail
{shares} shares × {fmv} value, less the price paid
whLabel
withheld
eventsLabel
payroll events
cmpNo
No election:
cmpNoTail
of ordinary income
cmpWith
With one:
cmpSaved
Tax not due at vesting, at
Give up the shares: options or cancellation
The company repurchases your unvested shares for the price you paid. No tax.
It grants you options priced at today’s fair market value, $0.12 a share. The grant is not taxed either.
The options vest over time and cannot be exercised early. You pay nothing now, but you give up the growth so far.
With nonqualified options, growth until you exercise is ordinary income. Incentive stock options can make it capital gain, within limits.
Either way, the QSBS clock starts only at exercise, and never once the company’s gross assets pass $75 million.
Or the company cancels the unvested shares. No tax, now or later, and no shares.
Compare the four paths.
Do not exercise the new options right away. That recreates restricted stock, and the IRS could disregard the swap.
1
Repurchase at your price4,000,000 unvested shares for the $400 you paid
No tax
2
Options at today’s valueOn 4,000,000 shares at $0.12 each
No tax
3
Hold options that vestNo payment now. Growth is taxed when you exercise or sell.
$0 now
Accelerate the vesting
Capital gain QSBS clock starts
Options that vest
Ordinary income QSBS clock starts
TodayExerciseSale
Do nothing$8,824,601
ordinary income on the vesting dates after the fixyou keep the shares
Accelerate the vesting$479,600
taxed on the fix dateyou keep the shares, and later growth is capital gain
Options that vest$0 now
you give up $479,600 of growthwith nonqualified options, growth until exercise is ordinary income
Cancel$0
now or laterthe 4,000,000 unvested shares are gone
Do not exercise the new options right away
Arguing that no election was needed
Two arguments say the 30 days never mattered. Each turns on the facts, and the company’s records have to match.
Vested from the start: if you controlled the company when the shares were issued, forfeiture may never have been a real risk.
Never issued: if the issuance never actually happened, the shares are issued now, with a new 30 days.
It costs little only until the value rises. After the $0.12 Seed, you would pay $480,000 or be taxed on $479,600.
The IRS can disagree, and investors and buyers will ask how you support either argument.
Outside directors, most advisors and consultants, and LLC members taxed as partners are not employees. Nothing is withheld, and the income is usually self-employment income.
valueTitle
Fair market value of a share
incomeTitle
Ordinary income on each vesting date
payrollTitle
Ordinary income, and the tax withheld
issued
You receive the stock
cliff
One year
vestedLabel
shares vested
incomeLabel
ordinary income
taxLabel
federal tax at
soldLabel
shares sold to pay it
electLabel
Ordinary income on day one
electDetail
{value} fair market value minus {paid} paid
saleLabel
You sell
saleGain
capital gain
saleGrowth
on growth from {from} to {to} a share
hpStart
Your holding period starts on day one
hpLong
Long-term after a year
perMonth
a month
todayLabel
Today
oneTime
Ordinary income on the fix date
fixDetail
{shares} shares × {fmv} value, less the price paid
frozeTotal
Ordinary income as the preferred vests: {income} in all
frozeDetail
each batch at {fmv} a share, frozen on the fix date
whLabel
withheld
eventsLabel
payroll events
cmpNo
No election:
cmpNoTail
of ordinary income
cmpWith
With one:
cmpSaved
Tax not due at vesting, at
The company’s deduction
Your ordinary income is the company’s deduction. A timely Form W-2 or 1099 treats you as having included it.
With an election at full value, you have $0 of income and the company has a $0 deduction.
Most startups lose money early, so a deduction in those years usually adds to the company’s net operating losses, which can reduce its tax in later years.
You
$8,824,601
your ordinary income as you vest
=
The company
$8,824,601
deducted in the same years
With an election at full value:$0 taxed, $0 deducted
LLC interests, early exercise and other cases
LLC profits interests
Generally not taxed when granted or at vesting. Often prudent to file a protective election anyway.
Options you exercise early
The 30 days start when you exercise.
Selling to a buyer with new vesting
If vested shares are exchanged for buyer stock that vests, a new 30 days starts at closing.
Vesting added at a funding round
Adding vesting to shares you already own needs no election. New shares that vest need one.
LLC conversions and flips
New shares that vest need an election within 30 days.
Founders outside the U.S.
Not a U.S. citizen or resident? The U.S. does not tax income from work performed abroad. File anyway.
Shares held by a trust or holding company
You file. The holder and the company each receive a copy.
Spouses
No spouse’s signature is required, even in community property states.
Paying with a loan
If you are not personally liable on the note, your election may have no effect. The note should bear interest.
Correcting or revoking an election
Within the 30 days, mail a corrected election. A revocation needs IRS consent and a fee, and after day 30 it is rare.
Things that do not work
Gifting or selling unvested shares, filing late, giving the election only to the company, or cancelling and regranting the shares only to start a new 30 days.
Founders outside the U.S.
For a founder who is not a U.S. citizen or resident, the U.S. taxes this income based on where the work is performed.
If you are not a U.S. citizen or resident and you work only abroad until your shares vest, the U.S. does not tax the wage income from your shares.
U.S. citizens and green card holders are taxed on their worldwide income, wherever they live.
Consider filing anyway if you may move here, or spend substantial time living or working here. A later move does not open a new 30 days.
Other countries have their own rules. The U.K.’s closest match is a section 431 election, signed with your employer within 14 days.
Days worked in the U.S.
Days worked abroad
U.S. taxes this partNot taxed in the U.S. if you are not a citizen or resident
Moving to the U.S.?
Without an election, everything that vests after you move is taxed here. With a $0 election, the growth is taxed only when you sell. Missed the deadline? Use a fix before you move.
No SSN or ITIN?
The regulations require one, and an ITIN takes weeks to issue. What to do without one. You cannot file online.
Key terms
Section 83
The tax rule for property transferred in connection with the performance of services, even if you pay for it.
Property
Stock and other property you can own. Not money, and not an unfunded, unsecured promise to pay you later.
Restricted stock
Stock you forfeit if you leave before it vests.
Vested
No longer subject to a substantial risk of forfeiture, or transferable.
Substantial risk of forfeiture
A real possibility of forfeiture, because keeping the stock depends on the future performance of substantial services or on a condition related to a purpose of the transfer.
Service condition
You keep the stock only if you continue to perform substantial services.
Transferable
You can sell it, and the buyer takes it free of the risk of forfeiture.
Fair market value
The price a willing buyer would pay a willing seller, ignoring the vesting.
Ordinary income
Income taxed at regular rates, up to 37% federal. Compensation, including wages, is ordinary income.
Capital gain
The amount you sell for, minus your basis. Held more than a year, it is taxed at up to 20% federal.
Holding period
How long tax law treats you as owning the stock. It starts at vesting, unless you file a §83(b) election, in which case it starts when you receive the stock.
Basis
What you paid, plus ordinary income you already recognized.
Recognize
Include income or gain in gross income for this year.
Realize
An event, such as a sale, that fixes a gain or loss.
§83(b) election
Your choice, filed within 30 days, to be taxed when you receive the stock, not as it vests.
QSBS
Qualified small business stock. If issued by a qualifying corporation and held for at least 3 years prior to sale, some or all of the sale gain is excluded from federal income tax.
The 30-day checklist
Do it all
25 days of cushion
Day 0Day 5Day 30
Day 0The day of transferSign the stock purchase agreement and pay. Write down the date.
By day 3Prepare itYour letter, or Form 15620. Check the numbers against your stock purchase agreement.
By day 5Give the company a copyGive it a signed copy. Do the same for any trust or holding company that holds the shares.
By day 5Mail itBy certified mail, from the post office counter, with a return receipt.
AfterKeep the proofThe postmarked receipt, the return receipt and the signed election. Keep them until the IRS can no longer assess tax for the year you sell.
Day 30The deadlineOnly a weekend or legal holiday, IRS disaster relief or service in a combat zone moves it.
Questions?We are here to help.
NOTICE: This guide is general information about U.S. federal tax as of October 2026. It is not legal or tax advice for any person, and reading it does not create an attorney-client relationship. Tax law changes, sometimes retroactively.
NOTICE: This guide is general information about U.S. federal tax as of October 2026. It is not legal or tax advice for any person, and reading it does not create an attorney-client relationship. Tax law changes, sometimes retroactively.
