How do I make an 83(b) election?
The 83(b) election must be filed with the IRS within 30 days of acquiring the shares.
This article provides general information about filing 83(b) elections. If you’re completing paperwork involving the issuance of stock subject to vesting on Clerky, you will be emailed a document titled “83(b) Election and Instructions” that contains more information. That document includes pre-filled 83(b) forms and detailed steps for filing your election.
This article outlines suggested best practices for making an 83(b) election. Non-US taxpayers may find additional helpful information in How does a non-US taxpayer make an 83(b) election?.
You can make an 83(b) election by filing a statement with the IRS within 30 days of acquiring your shares. An 83(b) election tells the IRS how you’d like to be taxed on shares that are subject to vesting. Making this election usually results in lower taxes for founders and other people who acquire shares subject to vesting in an early-stage startup. Most startup lawyers strongly advise people who have acquired these types of shares to file an 83(b) election.
The steps below explain how you can file your 83(b) election and keep track of the evidence. We’ve outlined a process that goes beyond the bare minimum because retaining proof of the 83(b) election can help you avoid problems with legal due diligence in the future.
How to File Your 83(b) Election
Fill Out Two Copies of Your 83(b) Election Form
Make sure you fill out both copies of your 83(b) election form, including your SSN / ITIN and electronic signature. If you need to make any corrections or additions, be sure to make them on both copies.
If you are a non-US taxpayer, see How does a non-US taxpayer make an 83(b) election? for more information.
If you’re completing paperwork involving the issuance of stock subject to vesting on Clerky, you will be provided with two pre-filled forms.
The IRS decision to permit electronic signatures is a temporary policy that is currently set to expire on October 31, 2023. This policy may be extended or made permanent.
Include the Following in a Single Envelope
- IRS Transmittal Letter
- Two copies of the signed 83(b) election form
- A self-addressed, postage-paid envelope
Clip the self-addressed, postage-paid envelope to one copy of the 83(b) election form for the IRS to date-stamp and return. Consider ensuring that this return envelope has postage and labeling for Priority Mail with Certified Mail service.
A date-stamped copy is not required and the IRS is inconsistent about returning it. Nevertheless, practically all startup attorneys recommend requesting a date-stamped copy for company and taxpayer records.
Send by USPS Certified Mail with Return Receipt
Send the envelope containing your 83(b) election forms by USPS Certified Mail with Return Receipt to the IRS mailing address where you would file your annual income tax return by paper. Consider using Priority Mail with the Certified Mail service instead of First-Class Mail.
Make sure to obtain a postmark on the certified mail receipt (PS Form 3800) from your USPS office.
For mailing addresses, see Where to File Paper Tax Returns With or Without a Payment.
If you must use a private delivery service, check IRS requirements and be sure to obtain written proof of the mailing date that complies with IRS rules.
Monitor the Tracking of Your 83(b) Election Envelope
You can monitor the tracking of your 83(b) election envelope so that you can send another if the first is lost or destroyed in transit.
Keep the Following in the Company and Taxpayer Records
- A copy of the USPS Certified Mail Receipt with the postmark
- A copy of the tracking history for the delivery to the IRS
- The USPS Return Receipt, if returned
- A copy of the election, ideally the date-stamped copy from the IRS, if returned
- A copy of the USPS Certified Mail Receipt for the file-stamped copy
- If available, a copy of the tracking history for the file-stamped copy
Managed 83(b) Election Add-On
All Clerky customers using products that involve the issuance of stock subject to vesting have the option to use our managed 83(b) election add-on. With our add-on, you can easily file your 83(b) election through Clerky, and keep track of the evidence as well.