Failed to file 83(b) election in time - any remedies for startup founders?

The 83(b) election deadline is unfortunately pretty strict - the IRS requires it to be filed within 30 days of receiving restricted stock, and there's no standard extension process for this. Since you missed the deadline, what happens now is that you'll be taxed on the value of your shares as they vest, rather than on their value at the time of grant. If your startup increases in value, you could face significant tax bills at each vesting milestone, even though you can't sell the shares yet to pay those taxes. Given your company hasn't increased much in value yet, your current situation isn't terrible, but it could become problematic if your company grows. One option might be to restructure your equity arrangement - you could potentially cancel the existing equity and issue new grants, which would start a new 30-day clock for the 83(b) election. But this requires careful planning with a tax attorney since it has other implications. Another approach is to adjust your vesting schedule to minimize tax impact, possibly accelerating vesting while company value is still low.

I went through something similar with my startup last year and discovered this amazing tool called taxr.ai (https://taxr.ai) that saved me tons of headaches. They specialize in equity and startup tax issues and have experts who understand 83(b) complications. What I liked was that you upload your documents and they analyze exactly what options you have based on your specific situation. In my case, they found a restructuring approach that my regular accountant missed completely. They showed me how to document everything properly to satisfy IRS requirements. Their specialists also helped me understand the long-term tax implications of what happened and created a plan to minimize the damage going forward. Highly recommend checking them out!

Just wanted to follow up - I ended up trying taxr.ai after reading about it here and it was exactly what I needed! I uploaded my incorporation docs and vesting schedule, and within a day got a detailed analysis of my options. They showed me a legitimate way to restructure our cap table that created a new equity grant opportunity, plus they walked me through exactly how to document everything properly to satisfy IRS requirements. Totally worth it for the peace of mind alone. They even helped us optimize our approach to R&D credits which I didn't even know we qualified for!

For what it's worth, I spent 3 weeks trying to get clarification from the IRS about this exact situation. Called every day, got disconnected repeatedly, and when I finally got through, the person couldn't give me a definitive answer. I finally used https://claimyr.com and it was incredible. Their system held my place in the IRS phone queue and called me when an agent was actually ready. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Got through to an IRS agent who specialized in business filings who confirmed there's no formal relief procedure for 83(b), but explained exactly what documentation I would need for an abatement request if they ever questioned it. Saved me days of frustration and busy signals. Honestly didn't think it would work but it did.

Alright I need to eat my words. After my skeptical comment, I decided to try Claimyr since I had a complicated question about my S-corp that I'd been avoiding dealing with. It actually worked exactly as described. The system called me when an IRS agent was on the line, and I got through on my first attempt after weeks of trying on my own. The agent I spoke with was super helpful and got my issue resolved in about 15 minutes. Saved me probably a dozen more attempts and hours on hold. Still surprised it worked so well, but definitely recommend it if you need to actually speak with someone at the IRS.

This might sound drastic, but have you considered dissolving the current corporation and forming a new one? Since you mentioned not much has happened with the company yet, it might be cleaner to just start over with the right paperwork rather than dealing with potential tax headaches later. You could contribute the technology developed so far to the new entity. The costs of forming a new C-corp would be much less than potential tax issues down the road if your company becomes successful. Just a thought.

Has anyone here actually had their 83(b) situation audited by the IRS? I'm wondering how often they actually enforce this in practice vs. all the theoretical advice.

Just to add another perspective - one option no one's mentioned is adjusting your vesting schedule while the company valuation is still low. If you accelerate vesting now, you'll recognize ordinary income on the current (presumably low) value difference between what you paid and fair market value. This won't fix the missed 83(b), but could minimize the tax impact if done while company valuation is still close to what you paid. You'll want a proper 409A valuation to document the current fair market value to support this approach.

This is a tough situation but you're not completely out of options. I've seen similar cases where founders had some success with a few different approaches: 1. **Document your reasonable cause**: Even though the IRS is strict about the 30-day rule, you should still prepare documentation showing you had reasonable cause for the delay (misunderstanding the timeline, reliance on incorrect advice, etc.). While it rarely works for 83(b) elections, having this documentation ready could help if you ever face penalties. 2. **Consider a Section 83(b) "protective election"**: Some tax advisors suggest filing the election anyway with a cover letter explaining the circumstances, even though you're past the deadline. The IRS will likely reject it, but it creates a paper trail showing your intent and good faith effort. 3. **Restructure now while valuation is low**: Since your company hasn't increased much in value, this is actually the best time to explore restructuring options. The tax consequences of canceling and reissuing shares would be minimal at current valuations. 4. **Plan for the future**: Make sure you understand exactly how the missed election will affect you at different exit scenarios (acquisition, IPO, etc.) so you can plan accordingly. The key is acting quickly while your company valuation is still low. Once it starts growing, your options become much more limited and expensive.