New Electronic Filing Option for Section 83(b) Elections

I. Introduction

On November 7, 2024, the Internal Revenue Service (IRS) released Form 15620, Section 83(b) Election (“Form 15620”), standardizing the requirements to make an election pursuant to Section[1] 83(b) (“Section 83(b) Election”), with the promise of making electronic filing available for Form 15620 in the future. The IRS has made good on its promise and now permits electronic filing of Form 15620 to make a Section 83(b) Election through the IRS website. This change eases the administrative burden of having to physically mail the Section 83(b) Election (including a sprint to the mailroom on certain occasions to meet the 30-day deadline).

This alert explains the process for electronically submitting Form 15620 and provides a brief background on the Section 83(b) Election.

II. Online Filing Instructions

To file electronically, a taxpayer must follow these instructions:

1. Create or sign in to the taxpayer’s account with ID.me, the IRS’s multifactor authentication platform.
2. After logging in, answer a series of questions to complete Form 15620.
3. Upon completion, the taxpayer can either submit the form electronically (preferred by the IRS) or download and mail a hardcopy to the IRS.
4. If the taxpayer chooses to submit Form 15620 online, the taxpayer will receive confirmation and can download or print a copy of the filed form to provide to the taxpayer’s employer or issuer of the restricted property.

While electronic filing is now available, taxpayers may still opt to file by mail. However, only one submission method should be used — either online or by mail. The online process will prompt taxpayers to confirm that the form hasn’t been mailed separately.

III. Action Items for Employers / Issuers and Employees / Individuals

1. Employers / Issuers. Employers and issuers of restricted property should update their equity grant documents, procedures, and notices to inform recipients about the option to submit Form 15620 online. In addition, such employers and issuers should reinforce internal processes to track the strict 30-day filing deadline for Section 83(b) Elections, confirm submissions, and retain proof of timely filing for their records. Proper tracking of Section 83(b) Elections submitted by such employers or issuers will help maintain compliance and avoid potential issues.
2. Employees / Individuals. Employees and other individuals receiving restricted property should consider filing Form 15620 online for a more streamlined process and assurance that the IRS has actually received the Section 83(b) Election. Regardless of the submission method chosen, such employees and other individuals must be mindful that certain key requirements have not changed, even when filing electronically. First, Form 15620 must be submitted within 30 days of the grant date; late submissions are not permitted, and failure to file on time may result in the inability to elect Section 83(b) treatment. Second, a copy of the completed and filed form still must be provided to the employer or issuer of the restricted property. Additionally, employees and other individuals should retain a copy of the completed Form 15620 for their records, even if filed electronically.

IV. Background on Section 83(b)

Typically, when an employee or other person receives restricted, nonvested property (e.g., stock, LLC units, or partnership interests) in connection with the performance of services, the taxpayer will pay taxes on such property at the time the restrictions first lapse at a future date at the then–fair market value. However, Section 83(b) allows taxpayers who receive such property to make an election to recognize taxable compensation income equal to the excess of the fair market value of the restricted property over the amount paid for such property at the time of grant, rather than when it later vests. By making a Section 83(b) Election, the property is treated as if it is fully vested at the time of the grant and the taxpayer accelerates the recognition of the compensation income, if any, to the then-current taxable year. Despite this current taxation, the Section 83(b) Election is beneficial when the property’s value is low at the time of grant or if the taxpayer paid full fair market value for such property, as it locks in a lower tax liability and potentially allows for capital gains treatment on future appreciation.

V. Final Thoughts

The introduction of Form 15620 and the option for electronic filing represent a significant modernization of the Section 83(b) Election process, providing taxpayers with a more efficient and streamlined way to fulfill their filing obligations. While these changes simplify the process administratively, taxpayers must remain vigilant to ensure that all requirements are met and that the election is filed within the critical 30-day deadline. Failure to do so will result in the loss of the opportunity to file a Section 83(b) Election, and the tax treatment of the restricted property will follow the default method, which could lead to a higher tax liability if the property appreciates by the time it vests.

Please reach out to Timothy J. Santoli, Liz Allison, or your Mintz relationship attorney if you have any questions regarding the Section 83(b) Election, Form 15620, or the electronic filing process for Form 15620.

Subscribe To Viewpoints