How to File an 83(b) Election: A Crucial Step for Startup Founders

If you’ve just incorporated your startup and received restricted stock as a founder, congratulations—you’ve taken a major step in building your company. But don’t stop there. One of the most important early tax decisions you’ll make is whether to file an 83(b) election with the IRS. If you don’t, you could face a hefty tax bill down the road.

What Is an 83(b) Election?

An 83(b) election is a simple IRS form that tells the government you want to be taxed on the value of your stock as of the date it was granted, rather than as it vests. This matters because if your company grows, the value of your stock will likely increase—without an 83(b), you’ll pay income tax each year as it vests and as the value rises.

By filing an 83(b), you pay tax up front on the low (often nominal) initial value, locking in a more favorable tax position.

How to File an 83(b) Election

Filing is straightforward—but must be done within 30 days of your stock grant date, and there are no exceptions or extensions.

Here’s how to do it:

1. Fill Out the Form
   Complete two signed copies of the IRS 83(b) election form. The form is short but must be filled out precisely.

2. Include a Cover Letter
   Write a brief letter requesting that the IRS date-stamp one copy and return it to you. This is optional, but highly recommended.

3. Include a Self-Addressed Stamped Envelope
   This makes it easy for the IRS to return a copy, although in practice, the IRS is inconsistent in doing so.

4. Mail via Certified Mail with Return Receipt
   This is your most important step. Sending your election via USPS Certified Mail with Return Receipt ensures you have proof of timely filing, which the IRS accepts even if they don’t return your stamped copy.

5. Keep Everything
   Store your signed forms, certified mail receipt, and any returned documents in a secure place. These are your only proof if there’s ever a dispute.

Valle Legal Makes It Easy

At Valle Legal, we include 83(b) election instructions, a customized cover letter, and the election form itself in each founder’s stock grant documents as part of our standard startup package. That way, you’re not scrambling to find the right paperwork or worrying about what to send.

We also make sure your stock grant documents clearly indicate the grant date, vesting schedule, and fair market value—so you can confidently complete the form and submit it on time.

Don’t Delay

Missing the 30-day window can result in significant unintended tax consequences. Read here about what happens if you fail to file your 83(b) election on time. The earlier you handle your 83(b) election, the better. If you’ve just received your founder shares or are about to incorporate your startup, talk to a lawyer who understands this process and can guide you through it.

Want help setting up your company the right way from day one? Contact Valle Legal to get started.