Section 83(b) Election: The 30-Day Window San Diego Founders Cannot Miss

Sep 8

5 min read

Cropped hands reviewing a stock grant agreement on a polished desk

A San Diego founder issues themselves restricted stock at a value of $0.001 per share. Three years later the company is worth millions and the shares vest. Without one filing made in the first 30 days, the entire increase in value becomes ordinary compensation income at vesting. Section 83(b) election is that filing, and the deadline is absolute. Pathfinding Consultants provides business tax preparation San Diego founders rely on to get this handled inside the window.

IRS DISCLAIMER:

This article is for general informational purposes only and is not tax, legal, or accounting advice. Section 83(b) outcomes depend on the specific property transferred, vesting terms, valuation, and current IRS guidance. Always consult a qualified tax professional, Enrolled Agent, CPA, or attorney before making an election or relying on this guide for a specific decision. Pathfinding Consultants encourages every San Diego business owner to seek personalized guidance for their own situation.

What the Election Actually Does

When substantially nonvested property is transferred in connection with the performance of services, the person performing those services may elect under IRC Section 83(b) to currently include in gross income the excess, if any, of the property's fair market value at the time of transfer over the amount paid for it — rather than waiting until the property later becomes substantially vested (source: IRS Instructions for Form 15620).

The Section 83(b) election is commonly made when the value of restricted stock is likely to increase substantially before it vests, since income would normally be recognized at vesting instead. Making the election early converts what would have been ordinary compensation income on the appreciation into potential long-term capital gain when the shares are eventually sold, and it starts the capital gains holding period at grant rather than at vesting.

The 30-day Deadline Is Absolute

An 83(b) election must be filed no later than 30 days after the date the property was transferred (source: IRS Instructions for Form 15620; Treas. Reg. Section 1.83-2). The 30 day deadline runs from transfer — the date the service provider acquires a beneficial ownership interest in the shares — not from an offer date or a signature date on a term sheet.

One narrow accommodation exists. In accordance with IRC Section 7503, if the thirtieth day following the transfer falls on a Saturday, Sunday, or legal holiday, the election is considered timely filed if it is postmarked by the next succeeding day that is not a Saturday, Sunday, or legal holiday. Beyond that, the IRS does not grant extensions on the 30 day deadline, and courts have not excused late filings. A San Diego founder receiving restricted stock should calendar the date the same day the grant is signed.

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Form 15620 and the Electronic Filing Option

For many years the IRS provided no official form for the Section 83(b) election, offering only a sample election statement in Rev. Proc. 2012-29. That changed with the release of Form 15620, an optional official form taxpayers can use to make the election. In July 2025 the IRS opened an electronic filing option for Form 15620, giving taxpayers a way to submit the election online with confirmation.

Form 15620 is optional rather than mandatory. A taxpayer may alternatively make the election by filing a written statement that satisfies the requirements of Treas. Reg. Section 1.83-2. Form 15620 generally follows those regulatory requirements while adding items not included in the older sample statement — including the name, taxpayer identification number, and address of the service recipient. The form is signed under penalties of perjury, and an unsigned or undated election is invalid.

Close-up of a signed tax election form and fountain pen

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What the Election Does and Does Not Cover

The Section 83(b) election applies where property has actually been transferred and remains subject to a substantial risk of forfeiture — restricted stock, and early-exercised options that settle into unvested shares. It does not apply to unexercised stock options or to typical restricted stock units at grant, because in those cases no property has yet been transferred.

Filing procedure has one detail worth knowing. The IRS finalized a change in 2016 removing the old requirement to attach a copy of the election to the income tax return, so a taxpayer who has made the election can still e-file the return normally. The election is still filed with the IRS within the 30 day deadline, and a copy is still provided to the service recipient — the employer or company for whom the services are performed.

Over-the-shoulder view of equity grant paperwork on a conference table

The Risk: the Election Is Essentially Irrevocable

A Section 83(b) election is generally irrevocable once made. The IRS will grant revocation only where the election was made under a genuine mistake of fact about the underlying transaction, and the request must be made within a limited window after the election.

That irrevocability carries real downside in one scenario. If the shares are later forfeited — the founder leaves before vesting, or the company fails — the tax already paid on the election generally cannot be recovered. This is the tradeoff at the heart of the decision: the election is inexpensive when the stock's value at grant is near zero, and increasingly expensive as grant-date value rises. The calculation is not whether the company will succeed, but what the tax cost is today against the risk of forfeiting later.

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Why This Is a Calendar Problem Before It Is a Tax Problem

Business consulting near me searches from San Diego founders spike on roughly day 35 after a grant, which is exactly too late. Pathfinding Consultants is an Enrolled Agent firm providing business tax preparation San Diego founders have relied on to evaluate a Section 83(b) election in the days immediately following a grant, when the option still exists.

Founders reviewing equity alongside entity structure may also want our guide to entity restructuring for tax efficiency (pathfindingconsultants.com/post/entity-restructuring-for-tax-efficiency-before-fundraising-or-sale), and our bookkeeping services overview (pathfindingconsultants.com/bookkeeping-services) covers the records that support basis when the shares are eventually sold. A business consulting near me conversation on the day a grant is signed is worth substantially more than the same conversation a month later.

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Common Mistakes with the Section 83(b) Election

Measuring the 30 day deadline from a term sheet or offer date rather than from the actual transfer of the property
Assuming the election applies to unexercised options or standard RSUs, when no property has been transferred at grant
Filing an unsigned or undated Form 15620, which makes the election invalid
Failing to provide a copy of the election to the service recipient after filing with the IRS
Making the election on a high-value grant without weighing the tax cost today against the risk of forfeiting the shares later

Every one of these mistakes is avoidable when the Section 83(b) decision is made in the first days after a grant, with the transfer date confirmed and the filing method chosen before the 30 day deadline closes. A business consulting near me search on grant day is what business tax preparation San Diego founders use to keep the option open.