Introduction

This article will provide information on 83(b) Election requirements and filings and provide instructions for preparing the filing through the workflow.

What is an 83(b) Election?

83(b) refers to a section of the U.S. tax code that allows you to change the tax treatment for restricted stock, i.e., an equity grant that is subject to vesting (or risk of forfeiture). Grants subject to vesting can come in the form of founder grants, restricted stock grants to early employees, or stock options that an employee exercises early.

Essentially, you can accelerate the calculation and payment of income tax for the entire amount of an equity grant that will eventually vest, and this calculation and payment is at the equity’s value as of the date you purchase it, rather than at its value when it vests over time (typically at higher values).

It is important to note that an 83(b) election isn’t for everyone. It only applies to those who receive restricted stock in connection with services they perform for the company, i.e., founders, employees, or contractors, and only for grants that have a vesting schedule.

IMPORTANT - 83(b) Election Filing Timing

If you choose to make the 83(b) election, it must be filed within 30 calendar days of acquiring the restricted stock.

The IRS is very strict about the 30 calendar day deadline - there are no extensions available.

Fidelity Private Shares will start the 30-day window based on the type of grant, and how it was added to the platform.

Generated RSAs

If an RSA is generated through the Grant Shares workflow, then the 30-day window starts on the associated grant acceptance date of the RSA. When this workflow is completed and the holder has accepted the RSA, they can run the Make 83(b) Election workflow.

This workflow will default the grant acceptance date to be the date the grantee completed the Grant Acceptance workflow. If you are uploading an approval that happened more than 30 days in the past and you do not change the grant acceptance date, then the holder will not be able to run the Make 83(b) Election workflow in the platform. You may want to consult with your legal counsel for situations where the grant date is close to or more than 30 days in the past.

Uploaded RSAs

The Grant Shares workflow allows you to upload grants that were executed outside of the platform. For an RSA that has been uploaded, the 30-day window starts on the date associated with the grant acceptance date. If applicable, the holder can run the Make 83(b) Election workflow once the Grant Shares workflow is completed.

Stock Options

For any options that have been early exercised, the 30-day window starts on the exercise date. The holder will be able to run the Make 83(b) Election workflow once they complete the exercise workflow. If they file an 83(b) election and the exercise is not approved, there are no consequences to the grantee.

The Make 83(b) Election Workflow

The steps below outline how to generate the 83(b) election form and cover letter in Fidelity Private Shares. It is your responsibility to print and mail this form to the IRS. If you have previously filed with the IRS, this workflow also allows you to upload that document.

On your workspace, click Start a new workflow > Make 83(b) Election.
Select the applicable grant from the dropdown menu and click Continue.
Select to have the platform generate the 83(b) form, and how you wish to sign the document.
Enter your tax ID number (usually your Social Security Number if you live in the United ), the fair market value of the shares you purchased, and the number of shares that are subject to vesting in that grant. You'll also include the amount of money you paid for the shares. The platform will provide some of this information for reference; you may wish to consult with your company's equity administrator or a tax advisor.
If you selected to sign the form electronically, review and then click Sign Document.
The platform will provide instructions on how to assemble your documents and send them to the IRS. Note that where you send your filing depends on where you live, so consult this page to find the address for your IRS office (this will be the same office where you send your tax returns). You can also consult our blog post with step-by-step instructions on sending your 83(b) to the IRS.
Send the form and cover letter with a self-addressed stamped envelope via certified mail. Again, the IRS is very strict about the 30-day deadline. Therefore, it is best to send it via certified mail with a return receipt requested and do so as soon as possible. This serves as proof that you sent it within the time window.
Keep a copy of the filing and mailing materials for your records.
Return to the workflow once you have received confirmation of the filing from the IRS to upload for the company's records.
Note that the IRS has not been sending confirmations of 83(b) Election receipt over the past couple of years, so even if you include a self-addressed, stamped envelope and extra copy of your filing, you may not receive that back.