How do I make an 83(b) election?
In most cases, startup lawyers strongly advise someone who acquires startup stock that is subject to vesting to file an 83(b) election with the IRS. Consult your own tax advisor for guidance on what an 83(b) election is and whether it is appropriate for your circumstances.
This article outlines suggested best practices for a taxpayer to make a proper 83(b) election. Additional details may be found in the 83(b) Election & Instructions. Non-US taxpayers may find helpful information in: How does a non-US taxpayer make an 83(b) election? Consult the IRS or your tax advisor for any updated requirements.
IMPORTANT: The 83(b) election must be filed with the IRS within 30 days of acquiring the shares.
STEP 1. Complete Four Copies of the 83(b) Election.
Clerky document sets involving the issuance of stock subject to vesting typically include a document called 83(b) Election & Instructions, which includes 4 pre-filled 83(b) election forms.
On all 4 copies of the 83(b) election, review, date, manually sign and insert the taxpayer identification number for the taxpayer (and spouse, if applicable).
STEP 2. Send Two Copies to the IRS.
Using the transmittal letter included in the 83(b) Election & Instructions, send two copies to the IRS by USPS Certified Mail with Return Receipt requested. Use the mailing address for the IRS office where the taxpayer files his or her income tax return. See Where to File Paper Tax Returns With or Without a Payment.
Although sending a second copy of the 83(b) election is not mandatory, it is recommended that taxpayers include it with a self-addressed, postage-paid envelope and request the IRS return it with a date-stamp for record-keeping.
STEP 3. Send One Copy to the Company.
STEP 4. Keep One Copy for Your Taxpayer Records.