What is a Section 83(b) election?

A Section 83(b) election is a filing you send the IRS within 30 days of receiving restricted stock or early-exercising stock options. It lets you pay tax now, on the value of the shares today, instead of later, on the (usually higher) value as they vest. You're betting that the stock goes up and that you'll still be holding it when it does. If you're right, you save real money in taxes. If you're wrong, you've prepaid a tax bill you'll never get back.

Priya joins an early-stage startup as employee number 40 and early-exercises 40,000 unvested stock options the day she's hired, paying $400 in total for shares currently worth $400. Her equity lawyer tells her she has exactly 30 days to decide: file an 83(b) election now, or risk owing tax on whatever the stock is worth each time a chunk vests over the next four years. She doesn't know yet whether the company will be worth $10 million or $0 in four years — but she has to decide anyway, today.

Key points

• An 83(b) election lets you recognize income (and pay tax) on restricted stock or early-exercised options at today's low value, instead of at each future vesting date.
• It is not available for RSUs — it only applies to actual shares you receive subject to vesting, such as restricted stock grants and early-exercised options.
• The deadline is a hard 30 calendar days from the transfer date (usually the grant or exercise date). There is no extension and no late-filing relief, ever.

What the election actually changes

Normally, when you receive stock that's subject to vesting — meaning the company can take it back if you leave before it vests — the IRS doesn't tax you when you receive it. Instead, you're taxed each time a portion vests, based on that portion's fair market value on the vesting date. If your stock has gone up a lot since grant, that can mean a large ordinary-income tax bill spread across several years, even though you haven't sold a single share.

An 83(b) election flips the timing. You tell the IRS: tax me now, on the full value of the stock today, rather than piece by piece as it vests. Once you've made the election and paid tax on that initial value, any further appreciation is treated as a capital gain when you eventually sell — not as ordinary income at vesting. If you hold the shares more than a year after the election, that later gain can qualify for long-term capital gains rates, which are usually well below ordinary income tax rates.

Here's the intuition: taxable value at grant is typically close to $0 (or very low) for a brand-new startup, because the stock hasn't had time to appreciate yet. If you can lock in your tax bill while the number is small, you avoid being taxed later at a much bigger number. The catch, of course, is that "later" hasn't happened yet — you're paying tax on a guess about the future.

Which situations it applies to

The 83(b) election is only available for property you actually receive that's subject to a substantial risk of forfeiture — in plain terms, stock you already own but could lose if you leave too soon. That includes:

• Restricted stock grants — actual shares given to founders or early employees, subject to a vesting schedule with repurchase rights.
• Early-exercised stock options — when you exercise unvested options before they vest, converting them into unvested restricted stock, then file the election on that stock.

It does not apply to:

• Restricted Stock Units (RSUs) — RSUs are a promise to deliver shares later, not actual property you hold today, so there's nothing to elect on until they vest. Read more about RSU taxation.
• Unexercised stock options — you can't elect on options you haven't exercised, because you don't yet hold any stock.

If your equity package is entirely RSUs, this whole page doesn't apply to you — skip to RSU taxation explained instead.

The 30-day deadline, and why it's absolute

The clock starts on the date the stock is transferred to you — typically your grant date for restricted stock, or the date you exercise for early-exercised options. You have 30 calendar days, not business days, to file. Weekends and holidays count against you; the only exception is that if day 30 itself falls on a weekend or federal holiday, the deadline pushes to the next business day (IRS Form 15620 instructions).

There is no reasonable-cause exception, no extension, and no way to fix a missed deadline after the fact. Courts have repeatedly upheld elections rejected for being even a single day late. If you miss the window, you're locked into ordinary-income tax treatment at each vesting date for that grant — permanently, for that batch of shares.

Because the deadline is measured from a mailed postmark (for paper filings) or a submission timestamp (for electronic filings), most advisors recommend filing well before day 30, not on it. Certified mail with a return receipt is the traditional way to prove a paper filing was on time; electronic filing removes that guesswork entirely by giving you an immediate, timestamped confirmation.

Form 15620: the new standard form

For decades, there was no official IRS form for this election — taxpayers and lawyers wrote their own letters, following a sample format the IRS published in Revenue Procedure 2012-29. In November 2024, the IRS released Form 15620, Section 83(b) Election, to standardize the process (Ballard Spahr). The form was revised again in April 2025, making one section — details about the company receiving your services — optional rather than required.

Using Form 15620 is optional, not mandatory. You can still file a self-drafted letter that includes all the legally required information (your name and taxpayer ID, a description of the property, the transfer date, the nature of the vesting restrictions, the fair market value, and the amount you paid), and it will be just as valid. The advantage of the official form is that it's a checklist: it reduces the odds you accidentally leave out a required detail.

The bigger change came in 2025: the IRS began allowing Form 15620 to be filed electronically through an IRS.gov account (verified via ID.me), giving filers instant, timestamped confirmation of receipt instead of relying on a mailed postmark (JD Supra). Paper filing by mail remains fully available for anyone who prefers it, or in specific situations — such as elections involving revesting agreements, entity taxpayers, or a price per share with more than two decimal places — where a custom statement may still be the better route. Whichever method you use, you must still send a signed copy to the company you performed services for.

A worked example

Marcus joins a Series A startup and early-exercises 20,000 unvested options at a $0.50 strike price, paying $10,000 out of pocket the day he exercises. The 409A valuation puts fair market value at exactly $0.50 per share on that date too, so there's no spread and no tax due if he files the election — he just needs to file it to start the capital-gains clock and lock in today's value.

Scenario A — Marcus files the 83(b) election within 30 days. He reports $0 of taxable income now (fair market value of $10,000 minus the $10,000 he paid). Three years later, the company is acquired and his shares are worth $8 per share — $160,000 total. Because he made the election and held the stock more than a year, his entire $150,000 gain ($160,000 minus his $10,000 basis) is taxed as a long-term capital gain. At a 15% federal long-term capital gains rate, he owes roughly $22,500, leaving him about $127,500 after federal tax (state tax not included).

Scenario B — Marcus skips the election. He pays his $10,000 to exercise but doesn't file anything. As his shares vest over the next four years, he owes ordinary income tax on the spread between fair market value and his strike price at each vesting date. Suppose the 409A value climbs steadily and by the time all shares have vested, he's paid ordinary income tax (say, a blended 35% rate including federal and state) on roughly $150,000 of cumulative spread — about $52,500 in tax — even before the company is acquired. When he eventually sells at $160,000, only the gain since his last vesting date qualifies for capital gains treatment; most of his profit was already taxed at the higher ordinary rate.

The difference — roughly $30,000 in this example — is the value of locking in a near-zero starting basis before the stock took off. Had the company instead failed and the shares gone to $0, Marcus in Scenario A would have paid tax on income he never actually received, with no way to get it back.

How WealthOS helps

WealthOS can track your grant date and count down your 83(b) deadline automatically, so you never lose a filing window to a busy week. Connect your grant or exercise details and we'll model both the "file" and "don't file" scenarios on your actual strike price and 409A valuation, so you can see the real dollar trade-off before you decide.

Related reading

• Should you exercise before an IPO?
• When should you exercise your stock options?
• How RSUs are taxed
• ISO vs. NSO: the tax differences that matter

Sources

• IRS, Form 15620, Section 83(b) Election
• Ballard Spahr, "New IRS Form 15620 Standardization Simplifies Section 83(b) Elections," November 2024
• JD Supra, "Equity Compensation: E-Filing Section 83(b) Elections," October 2025
• EisnerAmper, "The New 83(b) Form: Implications for Intermediary Holding Companies"

This article is educational and not tax, legal, or financial advice. Talk to a CPA or tax advisor about your specific situation.