So you want to file an 83(b) election? No problem.
Draft a letter to the IRS with your name, address, social security number, and the number and value of equity shares you are either accepting or exercising early. Print and sign four original copies, with a wet ink signature applied by hand. Send two copies, along with a cover letter and self-addressed return envelope, to the IRS (via certified mail, return receipt requested). Send one of the remaining copies to your employer. Keep the final copy for your records. And do all of this within 30 days of accepting a stock grant or early exercising your options early. If it works, the IRS will mail you back a stamped copy, and you have successfully filed an 83(b) election. Don’t forget to include yet another copy with your tax return the following year.
That is what is required today.
We think filing an 83(b) election should be easier, and are asking the IRS to help. To support this effort, Carta has partnered with Perkins Coie to build a broad coalition consisting of dozens of leading technology law firms, accelerators, venture capital investors, and industry associations.
Fixing the Process
To file an 83(b) election, the individual must undertake the exhausting process outlined earlier, including sending two signed physical copies to the IRS within 30 days of issuance of the grant or exercising options early.
During the pandemic, the IRS temporarily enabled some forms that previously required handwritten signatures to be submitted electronically, including the 83(b) election. This limited relief ends Oct. 31, 2023, and we are asking the IRS to modernize the process by:
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Permanently allowing 83(b) elections to be electronically signed
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Providing taxpayers the option to submit 83(b) elections electronically
Streamlining the filing process helps more people effectively plan for their taxes, which if not effectively managed can be a barrier to unlocking the value of equity ownership and broader wealth creation. Shifting this to electronic filing will also likely reduce costs and increase compliance.
With support from our partners, we submitted our comment letter to the IRS. We are grateful to our coalition members for joining this important effort and will continue to tackle this issue from a regulatory angle as well as legislatively by supporting the bipartisan Eliminating Paperwork for Startups Act.
As we make progress, we will provide updates.