83(b) Elections - General Information and Instructions

This article will provide information on 83(b) Election requirements and filings, and provide instructions for preparing the filing through the Shoobx workflow. 

What is an 83(b) Election? 

83(b) refers to a section of the U.S. tax code that allows you to change the tax treatment for restricted stock, i.e., an equity grant that is subject to vesting (or risk of forfeiture). Grants subject to vesting can come in the form of founder grants, restricted stock grants to early employees, or stock options that an employee exercises early. 

Essentially, you can accelerate the calculation and payment of income tax for the entire amount of an equity grant that will eventually vest, and this calculation and payment is at the equity’s value as of the date you purchase it, rather than at its value when it vests over time (typically at higher values).

It is important to note that an 83(b) election isn’t for everyone. It only applies to those who receive restricted stock in connection with services they perform for the company, i.e., founders, employees, or contractors. 

IMPORTANT - 83(b) Election Filing Timing

If you choose to make the 83(b) election, it must be filed within 30 calendar days of acquiring the restricted stock.

The IRS is very strict about the 30 calendar day deadline - there are no extensions available. 

The 83(b) Election Process in Shoobx

1. Purchase the shares. Make sure to pay your company for the purchase amount and sign the paperwork. The 30-day filing clock will begin ticking on the grant date. 
2. Click on "Start a new workflow" at the top right of your Shoobx dashboard, and select "Make 83(b) Election" under the list of workflows. 
3. Identify which grant you want to file an election for, and indicate that you want Shoobx to prepare the filing for you, and that you want to sign the filing electronically. 

1. On the next page, provide your tax ID number (usually your Social Security Number), the fair market value of the shares you purchased (this will be in your grant document in the chart on the first page), and the number of shares that are subject to vesting in that grant. You'll also include the amount of money you paid for the shares. 
2. Once you sign your documents, Shoobx will provide instructions on how to assemble your documents and send them to the IRS. Note that where you send your filing depends on where you live, so consult this page to find the address for your IRS office (this will be the same office where you send your tax returns).
3. Send it via certified mail. Again, the IRS is very strict about the 30-day deadline. Therefore, it is best to send it via certified mail with a return receipt requested, and do so as soon as possible. This serves as proof that you sent it within the time window.
4. Keep a copy of the filing and mailing materials for your records, and upload a copy in the workflow for the company's records. Note that the IRS has not been sending confirmations of 83(b) Election receipt over the past couple of years, so even if you include a self-addressed, stamped envelope and extra copy of your filing, you may not receive that back. 

Screenshots are for illustrative purposes only.

Third party mentioned and Shoobx, Inc are not affiliated.

Fidelity does not provide legal or tax advice

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