Get Sample Of 83 B Election

So what is a Section 83(b) election? It's a letter you send to the Internal Revenue Service letting them know you'd like to be taxed on your equity, such as shares of restricted stock, on the date the equity was granted to you rather than on the date the equity vests.

Example of an 83(b) Election If the total value of the company's equity increases to $100,000, then the co-founder's 10% value increases to $10,000 from $1,000. The co-founder's tax liability for year 1 will be deduced from ($10,000 - $1,000) x 20% i.e. in effect, ($100,000 - $10,000) x 10% x 20% = $1,800.

The Carta policy team worked with a broad coalition of accelerators, law firms, and investors to get the IRS to temporarily allow an electronic signature for 83(b) filings during the COVID-19 pandemic. Currently, once the form is signed electronically, you still need to physically mail it to the IRS.

Vesting means an employee has earned actual ownership of the company shares or stock options, usually by satisfying a certain time period of employment. Making an 83(b) election means that you're able to pay income taxes earlier, often before your company shares have had the opportunity to appreciate in value.

To make an 83(b) election, you must complete the following steps within 30 days of your grant date: • Complete the IRS 83(b) form on page 2. Mail the completed form to the IRS within 30 days of your grant date. Address it to the IRS Service Center where you file your taxes. (See the chart provided on page 3.)

Non-US Taxpayers You can make an 83(b) election by filing a statement with the IRS within 30 days of acquiring your shares. An 83(b) election tells the IRS how you'd like to be taxed on shares that are subject to vesting.