How to file 83b election in 2024?

The 83b election is critical for people who acquire restricted shares through stock option schemes. An 83b election allows taxpayers to choose not to wait until the stock becomes vested but to be taxed on the property’s fair market value at the time of grant.

If you want to get these possible tax advantages, you should file your election as soon as possible, within 30 days of getting the restricted stock. Knowing the right way to file 83b elections in 2024, especially through independent platforms like Eqvista, is crucial for compliance and tax benefits.

Now, you might wonder how to file an 83b election on Eqvista. It’s easy. We’ve simplified all the steps for filing 83b election in 2024 in this article.

83b election

When you receive stock subject to a vesting schedule, the IRS allows you a significant choice: the 83b election. This election transforms how your stock awards are taxed, potentially saving you significant taxes as your company grows. Let’s understand why it’s important to file 83b election in 2024.

What is the 83b election?

A IRC Section 83b allows founders, employees, and other service providers to quickly calculate their taxable income from the restricted stock awards with a vesting schedule. You can make a Section 83b election by writing to the IRS and requesting taxation on the restricted stock grant or purchase date instead of the vesting dates.

If founders elect to file under section 83b in 2024, they must act quickly to avoid missing the filing deadline. Shortly after the restricted stock grant or purchase, the taxpayer has 30 days to file an 83b election with the Internal Revenue Service. The day following the grant date is the starting point for calculating the last day to file. This includes every day, including weekends and holidays.

Benefits of filing 83b election

There are substantial tax benefits to filing an 83b election, particularly for those who receive equity income from startups or other quickly expanding businesses. Here are some of the most important reasons to file 83b election in 2024:

• Tax Savings on Appreciation – You can pay taxes on the shares’ fair market value at the time of grant instead of at vesting by submitting an 83b election. When you file your taxes, you only pay on the smaller value of the shares at the beginning. But if the shares’ value increases, you could save a lot on taxes.
• Avoiding Unexpected Tax Charges –  Without an 83b election, you would be taxed at the time of vesting, which could result in a higher tax bill if the stock value has appreciated. Moreover, you might face this tax liability when you do not have sufficient liquidity. An 83b election avoids this scenario by taxing the stock upfront, potentially at a lower rate, and when you are more prepared to handle the tax burden​.
• Starts Long-Term Capital Gains – One more benefit of the 83b option is that it begins the long-term capital gains treatment period from the grant date. This means that the long-term capital gains tax rate, which can be significantly lower than the rate for ordinary income, applies to any sale made more than a year after the grant (but not from the vesting date).
• Tax Planning Made Easier – If you file 83b in 2024, planning your future finances for these stock options will be easier. Rather than dealing with variable tax liabilities later on when the stock vests and maybe increases in value, you will be aware of the precise tax ramifications up front.

How to File an 83b Election on Eqvista?

You can now easily file 83b elections in 2024 on Eqvista. Our Premium customers can conveniently manage the entire procedure, from creating the form to downloading it.

Additionally, to relieve the burden and challenges associated with filing an 83b election, our team of trained specialists will offer you competent support through instructions, support, and other necessary assistance. The following section will give you an idea of the steps involved.

Steps of Filing 83b Election on Eqvista

Let’s get started with the steps to file 83b election in 2024 with Eqvista:

1. The company issues Common shares, Preferred shares, Restricted Stock Awards, or Early Exercised options with a vesting schedule to stakeholders.

2. The company creates 83b forms for the issued grants in two ways:

• Pre-filled Form – The form will contain the shareholder’s information, including their address and Taxpayer Identification Number (TIN). The administrator will review the pre-filled information, ensure its accuracy, and send the form to the shareholder to sign and submit to the IRS.

• Shareholder-Fill Out Form – The administrator fills in FMV and ensures shareholders’ emails are saved on the platform. Shareholders will receive the form and must manually fill in the required information, including their address and TIN. Once they have completed the form, they will submit it with the filled-in details to the IRS.

3. After filling out the details of the shareholder, the system performs an eligibility check for generating 83b forms:

• Identifying Grants – The grants issued must be Restricted Stock Awards, Common shares, Preferred shares, or Early Exercised options with a vesting schedule to be eligible for 83b Election.
• Eligibility Criteria – The system considers the grant issuance date and the current date for eligibility criteria. The reason is that the 83b Election must be sent to the IRS within 30 days of receiving the shares.

For example, if today’s date is February 3rd, the system will consider all the grants issued between January 3rd and February 2nd for generating the 83b form.

Here is an example of a grant eligible for 83b Election:

Here is an example of a grant not eligible for 83b Election:

4. After the account owner generates and sends 83b to the shareholder, they will receive a reminder email.

5. Once the invite has been accepted, the shareholder will be redirected to the shareholder account with three options to sign the form:

• Fill and E-Sign on Eqvista – Fill and electronically sign the form on Eqvista. Once signed, mail the completed form to the IRS.

• Print, Manually Fill – Print the form, fill in your information manually, and mail the completed form to the IRS.

• Skip the 83b Election – When you decide to skip submitting the form if you are not in the US or your financial advisor suggests against filing the 83b election.

6. After generating the form and sending it to the shareholder, the administrator can check the status of the form.

7. The shareholder can download the electronically-signed 83b form or print the form, fill in the information manually, and mail the completed form to the IRS. Then, upload the completed form on Eqvista for record keeping.

Here is a downloaded copy of the electronically signed 83b form.

Example of 83b election

An employee receives 50,000 options on the 10th of January 2024 with a vesting schedule. The employee has early-exercised the stock options.

The company generates 83b using a pre-filled form, reviewing the pre-filled information, and sending the form to the employee.

After performing the eligibility check, the system generates the form and sends it to the shareholder. The employee will receive a reminder email with an invite. Once the invite has been accepted, the employee will be redirected to the shareholder account with three options to sign the form.

After generating the form and sending it to the shareholder, the company can check the status of the form. The employee can download the electronically-signed 83b form or print the form, fill in the information manually, and mail the completed form to the IRS. The 83b must be sent to the IRS within 30 days of receiving the options i.e. before the 9th of February 2024.

Then, upload the completed form on Eqvista for record keeping.

What are the detailed filing instructions in 83b election?

When planning to file 83b election in 2024, you need to include detailed information in three main areas:

• Personal Taxpayer Information
• Transfer Date & Taxable Year
• Company Name & Shares Information.

Here’s a breakdown of what you should include for each:

• Personal Taxpayer Information – When you file 83b election in 2024, your form must include your full official name and current mailing address, Social Security Number (SSN), and taxpayer identity. Make sure these details are correct to avoid form processing delays.
• Transfer Date & Taxable Year – If you exercised your options or received the shares, you must include the precise date of grant in the section on the transfer date and taxable year on your 83b election form. This is a very important date because it starts the 30-day time you must file 83b election in 2024. Keeping accurate records of these times helps you meet IRS deadlines and avoid penalties for filing late.
• Company Name & Shares Information – The 83b election form must clearly reference the issuing company’s legal name and the total number of shares granted or options exercised. It’s also important to tell how much each share was worth on the market at the time of the grant. Accurate information about the shares is important to determine the possible tax effects correctly.

File 83b Election in 2024 with Eqvista!

There are valid reasons for considering to file 83b election in 2024. Still, you shouldn’t make that choice until you’ve carefully considered all the risks, variables, and your unique case. Now that you know how to file an 83b election on Eqvista, it’s time to gather the required information and documents and request a consultation for further deets.

Eqvista has an easy-to-use interface that helps shareholders fill out and submit the 83b voting form. This ensures that all the necessary information is included and that the form is submitted within the crucial 30-day window.

Eqvista lets you track where your form is and keep records for future use. This way, you can ensure you stay compliant and are ready for any tax effects due to your equity compensation. For more detailed guidance and support throughout the process, refer directly to Eqvista’s support page or contact us!