Founders of a corporation usually receive their stock subject to vesting: it's theirs, but the company can buy it back at cost if they leave early. The tax code treats stock that can still be taken back as not yet received, and taxes it as it vests, at its value on each vesting date. If the company raises money in its second year, that value can be real, and the tax on it is due in cash on stock you can't sell. The 83(b) election avoids that, and it has a 30-day deadline.
What the election does
Filing under section 83(b) tells the IRS to tax the whole grant now, at its value on the grant date, instead of piece by piece as it vests. For a new company that value is tiny, often a fraction of a cent a share, and if you pay that price for the shares, there's nothing to tax. Any growth in value after that is taxed as a capital gain when you eventually sell, not as ordinary income as the shares vest.
Founders who live abroad
The US taxes payment for work based on where the work is done, so a founder working entirely abroad may owe the US little or nothing as the stock vests. Your home country may still tax it, though, and a founder who later moves to the US would owe US tax on what vests after the move. That's why most advisers still recommend the election for founders abroad.
Who files, and when
Anyone who receives stock that can be forfeited, which is what vesting means: founders, and employees or advisers who exercise options early. The election has to be made within 30 days of the grant, counted from the date the stock is issued. There's no extension, no late election and no allowance for not knowing. Stock that's fully vested when it's issued doesn't need one.
How to file it
- Complete Form 15620 The IRS introduced this form for the election in November 2024, in place of the letter most people used before. It asks for your details, the company, the stock, the grant date, what you paid and the fair market value.
- Send it to the IRS The IRS accepts the form online, but that route needs an ID.me account, which needs an SSN or ITIN, so founders abroad without one post it. Send it to the address the form's instructions give for your situation, by a method that proves the date, such as a tracked courier. Keep the proof with the company's records, because it's your only evidence the election was made in time.
- Give the company a copy The corporation keeps it with its stock records. Since 2016 you haven't had to attach a copy to your tax return, but keep one yourself.
Filing without an SSN
The form asks for a taxpayer identification number. A founder with no SSN or ITIN can still file on time by writing "Applied For" in that box and enclosing a copy of a Form W-7 ITIN application, then updating the IRS once the number arrives. Writing "Foreign" or N/A instead risks the IRS not processing the election, which is why advisers recommend applying for the ITIN. The ITIN guide explains the application.
If you miss it
Nothing can be done for that grant. The stock is taxed as it vests, at its value then. The usual fixes are to speed up vesting of what's left, which investors may not like, or to accept the tax. It's far easier to set the reminder on the day the stock is issued.