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There is a one-page form that can save founders hundreds of thousands of dollars in taxes. It must be mailed to the IRS within 30 calendar days of receiving restricted stock.
Miss it by one day and there is no fix.
What the 83(b) election does
When you receive restricted stock that vests over time, the IRS default rule under Section 83 is simple: you are taxed at ordinary income rates as each tranche vests, based on the FMV at vesting.
At founding, your stock might be worth $0.001 per share. Four years later, it could be worth $10 per share. Without an 83(b), every vesting event triggers a tax bill on the difference. At ordinary income rates. Before you have liquidity to pay it.
The 83(b) election overrides this default. It tells the IRS: tax me now, on the full grant, at the current value. If FMV is near zero, the tax is negligible.
Why it matters for QSBS
Filing the 83(b) starts your Qualified Small Business Stock holding period immediately. To qualify for the Section 1202 exclusion (up to $15 million in federal tax-free gains for post-July 2025 stock), you need to hold the stock for at least 3 years.
Without the 83(b), the QSBS clock does not start until each tranche vests. That can push the required holding period years further out.
For stock acquired after July 4, 2025, the tiered exclusion makes early clock-start even more valuable:
- 3 years: 50% exclusion
- 4 years: 75% exclusion
- 5+ years: 100% exclusion
The deadline is absolute
30 calendar days from the date you signed your Restricted Stock Purchase Agreement. Not business days. Calendar days.
If day 30 falls on a weekend or holiday, the IRS position is that the deadline does not move. Mail it early.
No extension. No exception. No retroactive filing.
How to file
The 83(b) election is a one-page letter. It must include:
- Your name, address, and taxpayer ID
- A description of the property (shares received)
- The date of transfer
- The taxable year
- The fair market value at grant
- The amount paid for the property
- A statement electing under Section 83(b)
Mail it certified with return receipt to the IRS Service Center where you file your return. Keep a copy with your tax records.
The mistakes we see
Filing late. One day past the deadline. Same outcome as never filing. We have seen founders lose six figures because the form was mailed on day 31.
Not filing at all. Some founders assume their lawyer or incorporation platform handled it. Neither is a safe assumption. Confirm it yourself.
Filing without confirming FMV. The 83(b) requires stating fair market value. If the company has raised capital, FMV may not be par value. Get a valuation or board-determined FMV before filing.
Assuming fully vested stock needs one. If your founder stock is issued fully vested with no forfeiture risk, there is no Section 83 restriction. No 83(b) is needed. The QSBS clock starts at issuance.
The bottom line
The 83(b) election is the most important tax decision most founders make. It takes 15 minutes to prepare and costs nothing to file.
Missing it costs years of tax optimization and potentially hundreds of thousands of dollars. There is no second chance.
We help founders file 83(b) elections correctly as part of every incorporation. If you recently received restricted stock and are not sure yours was filed, check now. Reach out at Fellow.
