Section 83(b) Election: Form 15620 and the 30-Day Restricted Stock Deadline

It is a choice to be taxed on restricted stock early, at the value it carries on the day it is transferred to you, instead of later as it vests. The IRS default runs the other way: stock that is nontransferable or subject to a substantial risk of forfeiture stays out of your income until it becomes substantially vested, and only then do you include its fair market value minus whatever you paid.^[1] For a founder whose company grows across a long vesting schedule, that default converts every tranche into ordinary compensation measured at a number nobody could predict on signing day.

The election flips the timing. You choose to include the value of the restricted property at transfer, minus any amount you paid, in the year of the transfer; the substantial vesting rules then stop applying, and later appreciation is not pulled into your compensation when the property becomes substantially vested.^[2] Weighing that choice against the rest of your income for the year is tax planning work, not a form-filling exercise.

Because the bill follows the value on the day you are taxed, and for early-stage stock that value is usually at its lowest on the transfer date. The IRS worked example is blunt about the gap. An employer sells you 100 shares at $10 a share when the fair market value is $100 a share, the stock carries a substantial risk of forfeiture for a 5-year period, and at the end of that period, with the shares at $200 a share, you must include $19,000 in income.^[6] None of that $19,000 arrives as cash. It is compensation on paper, taxed at ordinary rates, in a year you may have sold nothing.

Electing at transfer replaces that inclusion with one measured on the transfer date, and it also sets your cost: your basis for figuring gain or loss on a later sale is what you paid plus what you included in income as compensation.^[2] Everything above that basis is capital gain rather than wages. Founders at technology and SaaS startups run into this most often, because an early grant pairs a low valuation with a long vesting schedule.

It starts on the date the property was transferred to you. Not the date the board consent is countersigned, not the date the closing binder is circulated, and not the date you finally read the grant package. The rule sets a single outside date: you must file the statement "no later than 30 days after the date the property was transferred."^[3] Count calendar days, weekends included.

The restricted property rules describe one deadline and one outcome for missing it: no grace period, no late-filing procedure, and no way to cure the omission on the return you file months later. That is why the failure is almost never analytical, it is logistical. A grant signed at the end of a quarter, an incorporation package that arrives in pieces, or a founder who assumes the company files on their behalf all end the same way, with a lost election on stock that may be worth far more by the time anyone notices.

Both routes work. The election is made "by filing a written statement or Form 15620, with the Internal Revenue Service Center where you file your return"^[3], which is the mail route the rules describe. The IRS has since added an online submission channel for Form 15620 that runs through a verified IRS online account and returns an immediate confirmation, which removes the certified-mail suspense that used to define this filing. Use one channel, not both, and keep whatever proof of filing that channel gives you.

Filing is only half of it. The rules also require you to "give a copy of this statement to the person for whom you performed the services"^[7], and to anyone else who received the property. In practice the company needs that copy for its own equity and payroll records. The statement itself is not open-ended: it has to be signed, it has to say on its face that you are making the choice under section 83(b), and it has to carry a specific list of details.

You fall back to the default treatment, permanently, for that grant. Each time a tranche becomes substantially vested you include its fair market value, minus any amount you paid for it, in that year's income as ordinary compensation.^[1] The election cannot be made late, and nothing about filing season reopens it.

The size of the damage tracks the company's trajectory, which is exactly what nobody can promise in advance. In the IRS example, the deferred inclusion reaches $19,000 on stock bought at $10 a share.^[6] There is a second cost that gets overlooked: under the default rule your holding period for the stock does not begin until the property becomes substantially vested,^[1] so the clock on long-term capital gain treatment starts late as well. Missing the window costs you twice: once on the amount taxed, once on the rate that eventually applies.

This is the real downside, and it is not symmetric. If the shares are forfeited after you have already reported their value in income, your deduction is capped at what you actually paid for them, reduced by anything you realize on the forfeiture.^[5] The ordinary income tax you paid at transfer is not refunded, and it does not convert into a capital loss you can use elsewhere.

That is the trade in one sentence: you prepay tax on stock you might never keep, in exchange for taxing the upside at capital rates if you do keep it. The arithmetic favors electing when the transfer-date value is genuinely low and the odds of staying through vesting are high, and it turns hostile when the valuation at transfer is already substantial or your tenure is uncertain. Nobody can hand you those probabilities, which is why this belongs in a planning conversation rather than a filing checklist.

The election is for restricted property, which in practice means stock you already own but could still lose. The IRS is explicit on the other side of that line: you cannot make this choice for a statutory or nonstatutory stock option.^[5] An option is not the property. If your plan permits an early exercise and you receive shares that remain forfeitable, the election belongs to those shares and the clock runs from that share transfer, not from the option grant.

Two definitions decide the rest. Property is substantially vested once it is transferable, or once it is no longer subject to a substantial risk of forfeiture. And that risk generally exists only where the rights are conditioned on future performance of substantial services, or on a condition related to the purpose of the transfer where forfeiture is a real possibility.^[8] If nothing can be clawed back, the stock is already vested and there is nothing to elect on. If what you hold is options or restricted stock units rather than restricted stock, the ISO, NSO, and RSU taxation guide covers the rules that apply instead.

Differently before and after the election, which surprises most recipients. Dividends paid on restricted stock you did not elect on are treated as compensation rather than dividend income, and the employer reports them on Form W-2. If the same payments also show up on a Form 1099-DIV, you list them on Schedule B (Form 1040) with a statement that you already reported them as wages, and you leave them out of your dividend total.^[9]

After a valid election, those same dividends are treated the same as any other dividends, and a Form 1099-DIV is what you should expect to receive for them.^[9] The practical consequence is that your reporting has to match the position you took: dividend reporting that contradicts the election on file is the kind of mismatch that draws a notice.

No. It is a different election, for a different instrument, on a different timetable. Under section 83(i), qualified employees of a corporation whose stock was not readily tradable can elect to defer income for up to 5 years on qualified stock received from an option exercise or an RSU settlement, but only where the corporation maintains a written plan granting options or RSUs to not less than 80% of its U.S. employees with the same rights and privileges.^[10] Restricted stock is outside it by definition: qualified stock cannot include stock from a restricted stock award, and Form 15620 cannot be used to make a section 83(i) election at all.^[11]

The deferral is also narrower than it first appears: it applies only for federal income tax purposes and has no effect on the application of social security, Medicare, and FUTA taxes.^[10] The two elections answer different questions: section 83(b) decides when restricted stock you already hold is taxed, while section 83(i) decides whether a broad-based option or RSU program can push federal income tax on delivered shares into a later year.

The election is a modeling problem with a hard deadline bolted onto it: the transfer-date value, the realistic odds of vesting, the rest of your income for that year, and what an early acquisition would do to the shares. Top Pro Accounting, an Enrolled Agent (EA) practice serving Miami and South Florida, works through that with founders and early employees in English and Spanish, and can represent you before the IRS if the position is later questioned.

Founders who want the analysis run while the window is still open can start with our advisory solutions. When the election lands on a return, our individual tax return preparation service handles the reporting year and the basis records you will need when the shares are sold.