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# Section 83(b) Election: What It Is and How to File

The Section 83(b) election is one of the most important tax decisions a startup founder can make. Filing it correctly — and on time — can save you tens of thousands of dollars in taxes.

## What Is a Section 83(b) Election?

When you receive shares in a company that are subject to **vesting**, the IRS normally taxes you on the value of those shares **as they vest** (when their value could be much higher). A Section 83(b) election allows you to elect to be taxed **at the time of grant** instead — typically when the shares are worth very little.

## Why It Matters for Founders

Example scenario:

- You receive 1,000,000 founder shares subject to 4-year vesting
- At grant, shares are worth $0.001 each = $1,000 total value
- After 2 years, shares are worth $2.00 each
- Without 83(b): You’d be taxed on the $2,000,000 in value as shares vest
- **With 83(b): You’re taxed only on the initial $1,000** — a massive difference

## The 30-Day Deadline Is Critical

You must file the 83(b) election with the IRS **within 30 days of the share grant/purchase date**. This deadline is absolute — there are no extensions.

**Missing the deadline means you permanently lose the ability to make this election.**

## Who Should File an 83(b) Election?

You should file if:

- You received shares that are subject to a **vesting schedule**
- You believe the value of your shares will **increase significantly** over time
- You are a founder or early employee receiving equity compensation

You do **not** need to file if your shares are fully vested at the time of purchase (no vesting restrictions apply).

## How to File the 83(b) Election

### Step 1: Prepare the 83(b) Election Letter

The letter must include:

- Your name, address, and taxpayer ID (SSN or ITIN)
- Description of the property (shares)
- Date of transfer and taxable year
- Nature of vesting restrictions
- Fair market value at time of transfer
- Amount paid for the shares
- Statement that a copy is being provided to your employer/company

### Step 2: Sign and Date the Letter

Sign and date the election letter on or before the grant date (or within 30 days of it).

### Step 3: Mail to the IRS

- Send the original election to the **IRS Service Center where you file your taxes**
- Send by **certified mail** with return receipt to create a record of the mailing date
- Keep a copy for your personal records
- Provide a copy to the company

### Step 4: Attach a Copy to Your Tax Return

Attach a copy of the 83(b) election to your federal income tax return for the year the property was transferred.

## Common Questions

**Do I need to pay tax when I file the 83(b)?**
You’ll owe ordinary income tax on the value of the shares at the time of grant. For most founders with low-value shares at incorporation, this amount is minimal.

**What if I’m a non-US founder?**
Non-US founders may also benefit from filing an 83(b) election if they have US tax obligations. Consult a tax professional familiar with US and your home country’s tax treaties.

**Can EasyFiling help?**
Yes. EasyFiling can help you prepare and understand your equity documentation as part of your company formation package. [Learn more here.](https://easyfiling.com/services/us-company-formation/)