Written May 1, 2021
An 83(b) election is a letter you send to the IRS letting them know you’d like to be taxed on your equity on the date the equity was granted to you rather than on the date the equity vests.
If, as a founder or employee, you receive vested stock worth a nominal amount, such as .0001/share, it virtually always makes sense to file an 83(b) Election because your immediate, and overall, tax liability will be less.
However, if you receive stock valued at a higher amount such as $1.00/share, it may not make sense to file the 83(b) election. For example, if you receive 100,000 shares at $1.00/share, the 83(b) election would immediately cause you tens of thousands of dollars in tax liability. That's quite a hefty tax bill and if the company subsequently fails before your stock vests, you likely would have been economically better off to not have filed a Section 83(b) election.
The election must be filed with the IRS within 30 days of the date of your vested stock grant. Failure to file within that time will render the election void.
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