If you’re a startup founder or employee receiving equity, you’ve probably heard of the 83(b) election. It’s one of the most important tax elections in the startup world — and missing the deadline can be costly.
In 2024, the IRS introduced a major update: you can now file 83(b) elections online.
What Is an 83(b) Election?
When you receive restricted stock subject to vesting, the IRS generally taxes you as the shares vest. An 83(b) election allows you to pay taxes upfront on the stock’s current fair market value — often a much lower amount than its future value.
Done correctly, it can save founders and early employees significant tax dollars as the company grows.
What Changed: Online Filing
Historically, 83(b) elections had to be filed by mail within 30 days of receiving restricted stock. This often led to delays, lost mail, or missed deadlines.
Now, the IRS has launched online filing, making the process:
- Faster.
- More reliable.
- Easier to track.
Why This Matters for Startups
For entrepreneurs and employees, this update reduces the risk of paperwork errors derailing your tax strategy. But remember — the 30-day deadline still applies. Missing it means losing the election entirely, with potentially severe tax consequences.
Practical Example
An early-stage startup founder receives restricted stock valued at $0.01 per share. By filing an 83(b) election online, she pays minimal tax now. Years later, when the company raises funding at $5.00 per share, she avoids being taxed on that appreciation as her shares vest.
Key Takeaways
- The IRS now allows online filing of 83(b) elections.
- The 30-day deadline remains critical.
- Filing early can lead to major long-term tax savings.
Final Thought
This modernization is welcome news for startups and employees navigating equity compensation. But the decision to file an 83(b) is complex and time-sensitive.
At Hood Venture Counsel, we help founders integrate tax elections into their broader corporate governance and growth strategies.
Need guidance on issuing equity? Reach out to [email protected].
