The 83(b) election, step by step
Thirty days from the transfer, by mail or online, with a copy to the company: what the 83(b) election saves a founder, and how to file it.
Each founder bought 4,000,000 shares of restricted stock on September 1, 2026. Without an election, section 83 taxes the stock as it vests: every vesting date is income equal to that day's value of the shares vesting, less what was paid for them. The 83(b) election moves the whole measurement to the day of purchase — when the stock is worth exactly what the founders paid, so the income is zero.
Thirty days, from the day the stock is transferred — for Northwind's founders, October 1, 2026. There is no late filing.
September 1, 2026
Stock purchased and transferred; the 30 days start
October 1, 2026
Day 30: the last day to file the electionForm 15620
Same day
A copy to Northwind, and one kept with the founder's own records
Step 1: Fill in Form 15620 or write the statement
Form 15620, or a written statement that meets Treas. Reg. §1.83-2. Either must give your name, address and TIN, describe the property, state the transfer date and the tax year, the restrictions, the fair market value at transfer and what you paid, and say a copy went to the company.
Step 2: Mail it or submit it online within 30 days
Either mail it, as the form's instructions say, to the IRS office where you file your federal income tax return — or, since the IRS lists Form 15620 among its mobile-friendly forms, submit it online through an IRS Online Account. Use one method, not both, and keep proof of the date: the postmark or the online confirmation.
Step 3: Give the company a copy
The regulation requires a copy to the person you perform services for — here, Northwind — and to the transferee if that is someone else.
Step 4: Keep the proof forever
The election cannot be revoked without the IRS's consent. Keep the signed copy and the proof of filing — the postmark or the online confirmation — with the stock purchase agreement; a diligence team will ask for both.
Wrong
"We'll do it with the tax return": $52,500 of ordinary income at the cliff, then more every month.
Right
Filed by October 1, 2026: $0 of income now, a capital gain holding period that starts at purchase.
The election is a bet that the value will rise. If the stock is forfeited later, §83(b)(1) allows no deduction for the forfeiture — at a founder's price the bet costs nothing, which is why founders almost always file.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Anything marked as a convention is ours, not the rule-maker's.
- Federal statute
- 26 U.S.C. §83(b)(2) (opens in a new tab)Property transferred for services, and the 83(b) election's 30 daysFree to read
- Federal regulation
- Treas. Reg. §1.83-2(b)–(e) (opens in a new tab)How an 83(b) election is made, who gets a copy, and what it must sayFree to read
- IRS guidance
- IRS, Mobile-friendly forms (list, page 3: Form 15620, Online Account required) (opens in a new tab)Form 15620 can be submitted online through an IRS Online AccountFree to read
- IRS Pub. 525 (2025), Restricted Property — How to make the choice (opens in a new tab)Making the 83(b) election: a written statement or Form 15620Free to read
- Official form
- Form 15620 (Rev. 4-2025), Instructions — Where to File (opens in a new tab)Section 83(b) Election (PDF) — where to send it, and the copiesPDF · Free to read
- Form 15620 (Rev. 4-2025), Instructions — When to File (opens in a new tab)Section 83(b) Election (PDF)PDF · Free to read
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- 83(b) electionAn election, filed with the IRS within 30 days of receiving restricted stock, to be taxed on its value at grant rather than as it vests — at a founder's purchase price, usually no tax at all, and the capital gain holding period starts at once
- Restricted stockShares bought or received outright but subject to a vesting schedule: if the holder leaves early, the company may repurchase the unvested shares on the agreement's terms. Taxed under §83 as it vests, unless an 83(b) election is filed within 30 days
- VestingEarning equity over time, so a holder who leaves keeps only what has vested. The common schedule is four years with a one-year cliff: nothing for twelve months, a quarter on the first anniversary, then monthly to month 48Convention
See also
- Stock options, 409A valuations and vesting for startupsHow option strike prices are set by a 409A valuation, how vesting and the cliff work, and why ASC 718 makes every grant an expense on your P&L.
- 83(b) electionA filing that tells the IRS to tax restricted stock when you receive it, not as it vests. It has to be filed within 30 days of the transfer, and there's no extension.