employee equity compensation in tech startups
If you have stock options, the 83(b) election is the tax formality that makes your early exercise official to the IRS.
You must file an 83(b) election with the IRS within 30 days.
If you have stock options and want to get the full picture of how they work, read our Stock Option Starter Guide.
You must do all of this within 30 days of early exercising your stock options.
Don’t wait on this. A timely filing can mean the difference between paying nothing versus a huge and unexpected tax bill down the road.
Because it could minimize your stock option tax bill and keep the upfront costs of exercising low. To learn more, see What is early exercising?
The name refers to a provision under section 83(b) of the tax code that allows you to elect being taxed on your equity compensation today versus when it vests.
By filing a 83(b) election, you can pay tax on the 409A valuation of company shares today versus their 409A valuation in the future, which will likely be greater. The 409A valuation is re-evaluated every once in a while, and grows when your company becomes more successful.