Can someone please explain simply: the Section 83(b) election for my startup equity?

Thanks for explaining! So if I understand correctly, I'd pay taxes now on the full grant at today's lower value instead of paying higher taxes later as each portion vests? Two questions: 1) What happens if the company fails and my shares become worthless? Would I have paid taxes for nothing? 2) Do I just file this form with my normal tax return?

You've got the basic concept right! If the company fails and your shares become worthless, unfortunately you would have paid taxes on something that ultimately had no value. That's definitely the biggest risk with making this election - you can't get those taxes back. As for filing, this is important: the 83(b) election is NOT filed with your tax return. You must send it directly to the IRS within that 30-day window. You'll also need to give a copy to your employer and attach another copy to your tax return for the year. The process is a bit archaic - it typically involves certified mail to the IRS.

I'm curious - does taxr.ai also help with figuring out the current fair market value of the shares? That's the part I'm struggling with for my 83(b). My company is early stage and I have no idea how to value these shares.

This sounds interesting but I'm skeptical. Does it actually generate the proper 83(b) form that the IRS will accept? I've heard horror stories about people filing incorrectly and losing their election opportunity.

Yes, taxr.ai helps determine fair market value by analyzing your company documents, recent funding rounds, and 409A valuations if available. They'll explain what information from your company you need to provide for the most accurate assessment. They can even help you request the right documentation from your employer if you're not sure what to ask for. Regarding the forms, absolutely - they generate the actual IRS-compliant 83(b) election document customized to your specific situation. They follow the exact IRS requirements including all the technical language needed. The step-by-step filing instructions cover everything from how to mail it (certified mail with return receipt), where to send it, and what copies to keep. They've helped thousands of startup employees file successfully.

Wait how does this actually work? The IRS never calls anyone back. Is this some kind of scam where they pretend to be the IRS?

I find this hard to believe. I've been trying to reach the IRS for weeks about my tax transcript and can't get through. If this service actually worked, everyone would be using it.

It's not a scam at all - they don't pretend to be the IRS or call you themselves. What they do is navigate the IRS phone system for you and secure a spot in the callback queue. The actual IRS calls you back directly, and you can verify it's really them. They use some tech that keeps trying the IRS lines repeatedly until it gets through, then works through all the prompts to get you in the callback queue. Once they secure a spot, they text you with the estimated callback time from the IRS. The IRS has an official callback feature, but the problem is getting through to request one in the first place.

Does the 83(b) election apply to stock options too, or just restricted stock? My offer letter mentions ISOs but I'm not sure if this is relevant for my situation.

The 83(b) election generally applies to restricted stock, not stock options. For ISOs (Incentive Stock Options), you typically don't need to make an 83(b) election because you don't actually own the shares until you exercise the options. With ISOs, you don't pay taxes when they're granted or as they vest. You only pay taxes when you exercise the options (buy the shares) and later when you sell the shares. However, there are some complex AMT (Alternative Minimum Tax) considerations with ISOs that might apply depending on your situation. If your compensation includes actual restricted stock (not just options), then the 83(b) would be relevant. Check your specific grant documents to confirm exactly what type of equity you're receiving.

I filed one last year and never got any formal acknowledgment from the IRS. My tax advisor said that's normal - you just need to keep your certified mail receipt as proof you sent it within the 30-day window. When you file your taxes, you'll attach a copy of the election form. I also sent a copy with a self-addressed stamped envelope requesting they stamp it as received and return it, but never got that back either.