What is an 83(b) election?

When you receive stock options and have the potential to early exercise, we at compdesk help you evaluate whether or not filing an 83b election is beneficial for you.

Filing an 83b election is an important decision

When you receive stock options as compensation, you can choose to be taxed on the value of those options at the time they're granted. This is an 83(b) election. If your company's stock has gone up since it was granted to you, and your option is now worth more than its original price (the strike price) you might want to reconsider this decision.

If you fail to file properly in a timely manner (within 30 days of exercise), there are repercussions: not only can taxes from your stock option grant increase each year, but there's also no way for you to regain the same preferential tax treatment if you realize it makes sense after the 30-day window lapses.

How do I file my 83b election?

You can file the 83b election directly with the IRS. Usually, your company's equity management platform will make the 83b documentation available after exercising with steps for submitting.

Do I need to file my 83b election by a deadline?

Yes, you need to file your 83b election by the deadline. If you don't, it will not be considered by the IRS. You must file an 83b election within 30 days of early exercising your shares.

Do I need help filing my 83b election? Yes! It's always a good idea to get help from a tax professional if you're not familiar with how this works or where to find assistance with filling out these forms. There are many factors involved in determining whether or not 83b elections work for you. Our team can break down the implications and help you make a personalized and informed decision.

When should I NOT file an 83b election?

While the 83b election is an excellent tool for minimizing your tax liability, it isn't right for everybody. If your stock grant exercise creates a large initial tax liability, or you don't have enough money to pay the taxes due, then filing an 83b election may not be beneficial to you.

If you are considering filing an 83b election but are worried about the tax implications, it's best to speak with our team before proceeding.

Conclusion

If you are considering making an 83b election, it is important to remember that this is a complicated process that can have significant tax consequences.

Speaking with your compdesk advisor ensures you're implementing the best personalized tax strategy.