Form 15620 (April 2025), Section 83(b) Election, must be completed and mailed to the IRS Service Center where you file your taxes within 30 days of your grant date, with a copy sent to your employer.
Founders and equity recipients file IRS Form 15620 by completing the Section 83(b) election form. Mailing it to the IRS service center within 30 days of the grant date. A copy goes to the employer, and no separate cover letter is required. Corporate counsel typically reviews fair market value figures before submission to avoid errors.
What is an 83(b) election and why file it?
An 83(b) election is a provision under the US Internal Revenue Code that allows a taxpayer to pay income tax on restricted stock or equity compensation at the grant date rather than at the time of vesting. This election changes the timing of tax assessment for property received in exchange for services. By filing Form 15620, the taxpayer includes the fair market value of the property minus any amount paid for it in gross income as compensation on the grant date.
How does an 83(b) election benefit founders and early employees?
Founders and early employees who receive restricted stock subject to a vesting schedule face a critical tax decision. Without the election, ordinary income tax applies each time shares vest, based on the then-current fair market value. Filing an 83(b) Election accelerates that tax obligation to the grant date, when the equity value is typically low. This approach benefits individuals who expect their company's shares to appreciate significantly over the vesting period.
The potential savings are substantial. Paying tax on a low grant-date value locks in a smaller ordinary income tax bill. Future appreciation then qualifies for capital gains treatment upon sale, provided holding period requirements are met. Vest Counsel helps emerging brands and founders establish the legal foundation for equity arrangements that may require this election, including entity formation and governance structures.
What happens if a founder does not file an 83(b) election?
Failing to file means the founder pays ordinary income tax on each vesting tranche as it vests. If the company's value grows rapidly, later vesting dates trigger much higher tax bills. The election must be filed within 30 days of the grant date. Missing this deadline eliminates the ability to make the election. This single timing requirement makes early awareness and proper execution essential for anyone receiving restricted stock.
What do you need before filing Form 15620?
Filing Form 15620 requires three core elements: the official IRS document itself, specific personal and equity information, and a 30-day filing clock. The IRS updated its guidance in the 2024 Publication 525, confirming that founders can make the Section 83(b) Election by filing either a written statement or the official Form 15620 PDF. Missing any of these prerequisites causes the election to be invalid, exposing the recipient to higher ordinary income taxes when shares vest later.
What personal information does Form 15620 require?
Box 1 of Form 15620 demands the taxpayer's full name, taxpayer identification number (TIN, typically a Social Security number), and complete address, including street, city, state, and zip code. The IRS uses this information to match the election to the filer's tax return. A missing or incorrect TIN guarantees rejection, regardless of the other information provided.
What equity details must be included in Box 2?
Box 2 requires the exact number of shares and a full description of the restricted stock or property received. Founders must list the class of stock (common or preferred), the company name, and the grant date. Without this specificity, the IRS cannot identify which equity grant the election covers, making the filing useless. The form also documents the fair market value at grant versus the amount paid, capturing the taxable compensation amount.
How does Vest Counsel support this process?
Vest Counsel guides founders through the equity arrangements that trigger 83(b) Election requirements. The firm's services include entity formation, governance, and equity structuring where restricted stock grants occur. Filing Form 15620 correctly within the 30-day window sets the foundation for capital raising and future investor documentation.
Steps to prepare your filing:
Obtain Form 15620 or a written statement containing equivalent information
Complete Box 1 with name, TIN, and address
Complete Box 2 with share count and property description
Mail the form to the correct IRS Service Center within 30 days of the grant date
Send a copy to the employer as required by IRS instructions
How do you complete Form 15620 step by step?
Completing Form 15620 requires careful attention to detail and a strict 30-day filing window. Founders who miss this deadline lose the tax benefits permanently. The process involves four straightforward boxes plus a critical mailing step.
What information goes in each box?
Box 1 asks for the taxpayer's name, address, and Social Security number. Write these details next to the corresponding fields exactly as they appear on the tax return.
Box 2 requires the number of shares and a full description of the restricted stock or property being granted. Include the class of stock and any identifying details that distinguish this grant from others.
The form's core statement confirms the taxpayer elects under Section 83(b) to include the excess of fair market value over the amount paid as compensation income. This single sentence triggers the accelerated tax treatment.
How do you prepare the form for mailing?
Write the taxpayer's name, address, and the date at the top of the form.
Below "Department of the Treasury," address the form to the IRS Service Center where the taxpayer files taxes.
Complete Box 1 with personal identifying information.
Complete Box 2 with share count and property description.
Sign and date the election statement.
Mail the completed form within 30 days of the grant date.
Send a copy to the employer for their records.
The 83(b) Election loses its effectiveness if any step is skipped. A single missing signature or incorrect address triggers rejection. Founders should double-check every field before mailing, since the IRS offers no grace period for errors.
Where and when must you file the election?
The 83(b) Election must be filed within 30 days of the grant date, not the vesting date. Missing this window forfeits the election entirely. The IRS provides Form 15620 for this purpose. The completed form must reach the IRS Service Center where the taxpayer files their tax return.
The 30-day clock starts on the grant date. A founder who receives restricted stock on March 1 must file by March 31. No extensions exist for this deadline. Late filings are rejected, and the taxpayer loses the ability to accelerate their tax liability.
What steps are required to file the election?
The filing process involves three distinct actions, all completed within the same 30-day window:
Complete Form 15620 with the taxpayer's name, taxpayer identification number (TIN), and address, along with the property description and fair market value details.
Mail the completed form to the IRS Service Center where the taxpayer files their tax return. The instructions include an address chart on page 3 to identify the correct Service Center.
Mail a copy of the completed form to the employer who granted the equity.
What happens if the filing deadline is missed?
Missing the 30-day deadline eliminates the ability to make the election. The taxpayer then faces ordinary income tax on the shares as they vest, based on the fair market value at each vesting date. For a startup with appreciating stock, that difference produces a substantially larger tax bill.
Vest Counsel assists founders and companies with entity formation and governance, which includes ensuring proper documentation and timing for equity-related elections like the 83(b). Early coordination with legal counsel prevents costly filing errors.
What common mistakes should you avoid?
Filing an 83(b) Election involves strict procedural requirements. The most common errors can render the election invalid or create costly tax consequences. Founders and early employees who miss a single step often face unexpected tax bills or lose the election's benefits entirely.
What happens if a founder misses the 30-day deadline?
Missing the 30-day deadline from the grant date is the most frequent and fatal mistake. The IRS will not accept late filings under any circumstances. A founder who files even one day late loses the ability to pay taxes on the grant-date value. Must instead pay ordinary income tax on the full fair market value at each vesting date. This error can increase a founder's tax liability by thousands or even millions of dollars, depending on the company's growth.
Why does mailing a copy to the employer matter?
Failing to mail a copy of the completed Form 15620 to the employer creates compliance issues. May invalidate the election for practical purposes. The employer needs the copy to adjust withholding and confirm the election's validity. Without this step, the company may treat the shares as unvested for tax purposes, defeating the entire purpose of the election.
Which address should founders use for the IRS?
Using an incorrect IRS Service Center address delays processing or causes the election to be lost entirely. Founders must address the form to the specific IRS Service Center where they file their personal tax return, not a general IRS address. The instructions include a chart listing the correct center for each state.
Vest Counsel helps founders avoid these procedural errors through focused counsel on equity arrangements and complex deals. The firm's attorneys guide clients through the 83(b) Election process, ensuring every step—from the 30-day deadline to the correct mailing address—is handled correctly.
