Section 83(b) Election: Deadline, Filing, and Revocation

A Section 83(b) election is a written statement you send to the IRS to pay income tax on restricted equity at the time it’s transferred to you rather than at each vesting date. You have 30 days from the transfer to file it. The point is to lock in tax on the property’s current value, so any later appreciation can be taxed as long-term capital gain instead of ordinary income when you sell. The tradeoff: if you leave before the shares vest and forfeit them, the tax you paid is gone.

What the Election Changes About Your Taxes

Under the default rule in 26 U.S.C. § 83(a), you’re taxed when the property vests, on the spread between what you paid and the fair market value at that later date. Shares worth $1 at grant and $20 at vesting three years later produce $19 per share of ordinary income when they vest. The top federal ordinary income rate is 37%.

Filing the election moves the tax event to the transfer date. You recognize ordinary income equal to the value at transfer minus what you paid — in the same example, $1 per share. The $19 of growth is then a long-term capital gain when you sell, provided you’ve held the shares for more than one year from the transfer date. The top long-term capital gains rate is 20%, roughly half the top ordinary rate. That rate gap is the whole reason the election exists.

It also starts your capital gains holding period on the transfer date rather than on each vesting date. For founders and early employees on a four-year vest, that matters: without the election, every tranche restarts the one-year clock for long-term treatment.

When You Can File

The election is available when you receive property for services and that property is subject to a substantial risk of forfeiture — usually a vesting schedule tied to continued employment.¹ Fully vested property at receipt is already taxable under the standard rules, so there’s nothing to elect.

Common situations where the election applies:

Restricted stock awards granted to employees or founders that the company can repurchase at cost if you leave before vesting.
Early-exercised stock options. When a plan lets you exercise before vesting, you get restricted shares subject to the company’s repurchase right, and the 30-day window runs from the exercise date. For ISOs, the spread counts toward alternative minimum tax; for NSOs, the spread is ordinary income.
LLC profits interests, as a protective filing. IRS guidance generally allows you to avoid tax at receipt and vesting on a profits interest without an election if certain conditions are met, including not disposing of the interest within two years of grant. Many advisors file anyway, because if those conditions fail, the safe harbor disappears.²

One boundary worth naming: restricted stock units are not eligible. An RSU is a promise to deliver shares later, not a present transfer of property, so there is nothing to elect on. The shares only arrive at vesting, and standard rules govern.

The 30-Day Deadline

You have 30 days from the transfer date to get the election to the IRS. You can file before the transfer, but not a single day after the window closes.³ If day 30 falls on a Saturday, Sunday, or legal holiday, it rolls to the next business day.⁴

There is no extension and no late-filing relief. Miss the deadline and you’re back on the default schedule, taxed at each vesting event on whatever the shares are worth then. For early-exercised options, the clock starts on the exercise date, not the original grant.

What the Statement Must Include

You can use IRS Form 15620, released in late 2024 for this purpose, or draft your own written statement. Either is valid so long as it contains what the regulation requires.⁴ Treasury Regulation 1.83-2(e) lists seven items:³

Your full name, address, and Social Security or taxpayer identification number.
A description of the property: number of shares, class of stock, and company name.
The transfer date and the tax year the election covers.
The restrictions creating the forfeiture risk, such as the vesting schedule or repurchase provisions.
The fair market value at transfer, ignoring restrictions that will eventually lapse. For private companies, this usually comes from a 409A valuation or similar independent appraisal.
The amount you paid for the property, if anything.
A confirmation that copies have been provided to the required parties.

The difference between fair market value and what you paid is the income you’ll recognize for that year. The statement must be signed. The IRS accepts electronic and digital signatures on 83(b) elections and does not require any specific technology.⁵

How to File

Mail the signed statement to the IRS service center where you file your individual return. That address depends on your state. If you live outside the United States, mail it to the Department of the Treasury, Internal Revenue Service, Austin, TX 73301-0215.⁶ There is no online portal for this filing.

Send it USPS Certified Mail with Return Receipt Requested. That receipt is your proof of the postmark date and may be the only thing standing between you and an invalidated election if the IRS later says it never received the document.

You also have to give a copy to your employer or whoever you performed the services for.⁴ They need it to handle withholding and reporting, because the election shifts the employer’s withholding obligation to the transfer date instead of at each vesting event.

Since 2016, you no longer have to attach a copy to your annual income tax return.⁷ Keep the election, the certified mail receipt, and the return receipt with your tax records anyway. If the IRS ever questions the filing, those documents are your evidence.

What Happens If You Forfeit the Shares

This is the risk at the center of every 83(b) decision. If you leave, get terminated, or otherwise miss vesting, the company usually buys back the unvested shares. The stock is gone. The taxes you paid are not coming back.

The statute is explicit: when property is forfeited after an 83(b) election, no deduction is allowed for the amount previously included in income.¹ If you recognized $10,000 of income at transfer and paid $3,700 in federal tax, that $3,700 is gone. You paid tax on compensation you never kept.

The only loss available is a capital loss capped at what you paid out of pocket for the shares, minus whatever the company returns to you on forfeiture. Paid $500 to exercise, company repurchases the unvested shares for $0, capital loss is $500. The income you recognized through the election gives you no additional deduction.

That’s why the election is most attractive when the spread between fair market value and your purchase price is small. Early-stage startup stock bought at or near the 409A valuation often has a tiny spread, so the tax cost of filing is minimal. If those shares later become worth millions, you’ve converted a large ordinary income event into long-term capital gain. If you forfeit, you’ve lost a small tax payment. The math gets much worse when the election triggers a large upfront tax bill.

Can You Revoke It

Once filed, the election is essentially permanent. You can only revoke it with the consent of the IRS Commissioner, and that consent is granted only when the taxpayer was under a genuine mistake of fact about the underlying transaction.⁸ The standard is narrow: unconscious ignorance of something material to the deal itself.

The following do not qualify:

The stock dropped in value after you filed.
You didn’t understand the tax consequences of the election.
You didn’t understand the vesting restrictions.
A transaction you expected to close never happened.

A legitimate mistake-of-fact revocation must be requested within 60 days of discovering the mistake, typically through a private letter ruling, and rarely succeeds.⁹ The one other window: if you change your mind before the original 30-day filing deadline runs, you can revoke during that period. After day 30, mistake-of-fact is the only route.

Treat the election as irrevocable the moment it leaves your hands. Run the worst case — every share forfeited, every tax dollar lost — before you file. If that downside is tolerable against the upside of turning years of appreciation into capital gain, the election earns its place. If the upfront tax would cause real financial pain on forfeiture, think again.

1
Office of the Law Revision Counsel. 26 USC 83 – Property Transferred in Connection With Performance of Services
2
Internal Revenue Service. Revenue Procedure 2001-43
3
eCFR. 26 CFR 1.83-2 – Election to Include in Gross Income in Year of Transfer
4
Internal Revenue Service. Form 15620 – Section 83(b) Election
5
Internal Revenue Service. IRM 10.10.1 IRS Electronic Signature (e-Signature) Program
6
Internal Revenue Service. International – Where to File Form 1040 Addresses for Taxpayers and Tax Professionals
7
Internal Revenue Service. Internal Revenue Bulletin 2016-33
8
GovInfo. 26 CFR 1.83-2 – Election to Include in Gross Income in Year of Transfer
9
BenefitsLink. Revenue Procedure 2006-31