How to Handle Startup Founder Shares and 83(B) Election for Tax Filing? Completely Lost

I just co-founded a startup in 2024 with two other people and I'm totally confused about the tax implications. Our company issued me 700K shares as part of our founders agreement. Some of these shares vested immediately when we incorporated and the rest are vesting over the next few years. According to our founding documents, the par value is set at $.0001, but we actually purchased our shares at $.001 per share. So I wrote a check to the company for $700 total ($.001 × 700,000 shares). Our lawyers also filed an 83(B) election with the IRS for me. I'm completely lost about how to handle this for my 2024 taxes. Technically, I paid $700 for something with a par value of $70 ($.0001 × 700,000 shares). Do I need to report this? Is there some kind of income I'm supposed to declare? Does the 83(B) election change anything? Would really appreciate any help figuring out how to report this correctly when I file. I've never dealt with founder shares before and don't want to mess up my taxes.

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18 comments

Yuki Tanaka

•8M

The 83(b) election is actually your friend here! Since you filed it properly, your tax situation is much simpler than it could have been. When you receive shares subject to vesting (as you did), the IRS typically treats each vesting event as taxable compensation. However, by filing the 83(b) election, you're choosing to recognize any potential income in the year the shares were granted rather than when they vest. In your case, the taxable income would be the difference between what you paid ($.001 per share × 700,000 shares = $700) and the fair market value at grant. Since this appears to be at formation, the par value ($.0001) is likely lower than what you paid, so there's no taxable income to report. For your 2024 taxes, you should keep documentation of the 83(b) filing and the share purchase, but there's likely no additional income to report since you paid more than par value. The real benefit comes later - when your shares appreciate in value, any gains will be capital gains rather than ordinary income.

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Yuki Tanaka

•8M

If you did a friends and family round valuing shares at $.005 shortly after incorporation, that could potentially establish a fair market value (FMV) higher than what you paid. In that case, you might have taxable income equal to the difference between what you paid ($.001) and the FMV ($.005) multiplied by the number of shares. That would be $.004 × 700,000 = $2,800 of potential ordinary income. The company typically wouldn't issue a specific tax form for the 83(b) election itself. However, if there was taxable income from the transaction, it should be reported on your W-2 if you're an employee or on a 1099-MISC if you're not. Many early-stage startups miss this reporting requirement, which doesn't eliminate your obligation to report the income correctly.

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Andre Laurent

•8M

I went through something similar last year and was pulling my hair out until I found https://taxr.ai which specialized in analyzing all my startup equity documents. They actually helped identify a filing problem with my 83(b) election that could have cost me thousands in unexpected taxes. Their system basically scanned all my formation docs, equity agreements, and 83(b) election forms, then gave me a detailed report explaining exactly how to handle everything on my tax return. They even found a technical issue with my vesting schedule that my accountant missed. The real value was that I didn't have to pay for expensive legal consultations just to understand my basic tax obligations. Saved me a ton of headache with the IRS.

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Andre Laurent

•8M

They use a combination of document analysis technology and tax professionals. You upload your documents and their system extracts all the relevant information - dates, amounts, vesting schedules, etc. For complex cases, they have tax professionals who review the documents and provide specific guidance. It's definitely not generic advice - they caught specific issues with my filing that were unique to my situation. For cost comparison, it's actually significantly cheaper than most CPAs who specialize in startup equity. I was quoted $1,200-1,500 by several accountants who had startup experience, while this service was much more affordable. The real value though was in catching potential issues before they became problems with the IRS.

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Liam Mendez

•8M

I actually tried taxr.ai after seeing the recommendation here and wow - it was exactly what I needed! My situation was similar but more complicated (multiple funding rounds and some weird preferred share structures). The document analysis caught that my 83(b) election had been filed for the wrong number of shares (my lawyer had made a typo), and the platform provided a clear explanation of how to handle the correction. They also explained exactly which forms I needed to complete and even suggested a specific section of my tax return where I needed to include additional information. Definitely going to use this again next year when we close our Series A. So much clearer than the conflicting advice I was getting from different sources before.

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Sophia Nguyen

•8M

If you need to talk to the IRS about 83(b) elections or startup equity issues, good luck getting through on their phone lines. After spending 3 weeks trying to reach someone at the IRS about my messed up 83(b) filing, I finally used https://claimyr.com and it was a game changer. You can also see how it works in this video: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue so you don't have to waste hours with your phone on speaker. When they reach an agent, they call you immediately and connect you. I got through to a specialist who actually understood startup equity issues in less than an hour instead of wasting days on hold. The best part was I got a definitive answer directly from the IRS about how to handle my amended return with the 83(b) correction, which gave me peace of mind that I wasn't going to get hit with penalties later.

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Sophia Nguyen

•8M

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Isabella Brown

•8M

I was super skeptical about Claimyr at first (seemed too good to be true), but after struggling for WEEKS trying to get through to the IRS about my startup's 83(b) paperwork, I gave it a shot. Honestly floored by how well it worked. I had been trying to reach someone about whether I needed to amend my previous year's return after discovering some issues with my 83(b) election. Got connected to an IRS tax specialist in about 45 minutes whereas before I couldn't even stay on hold long enough to reach anyone (kept getting disconnected after 2+ hours). The agent walked me through exactly what forms I needed to file and confirmed I wouldn't face penalties if I fixed the issues now. Totally worth it just for the stress relief of getting actual answers instead of guessing.

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Maya Patel

•8M

For startup founder shares and 83(b) elections, there's a critical distinction between "cheap" stock and stock with genuine FMV differentials. Since you bought at formation with the common shares priced at $.001 (above par value of $.0001), you're likely in the clear IF that price represents genuine FMV at formation. The real question is whether $.001 per share was the legitimate FMV at the time of issuance. If you had investor interest or any other indication that the shares were actually worth more, the IRS could argue you received compensation equal to the difference. Also, many founders miss that the 83(b) election must be filed within 30 days of receiving the shares. Did you file within that window? Otherwise, the election might be invalid.

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Maya Patel

•8M

Good that you filed within the 30-day window - that's a common mistake that can't be fixed later. The IRS generally wouldn't apply a later valuation retroactively if there was a legitimate basis for the initial valuation. At formation, with no product, revenue, or investment, valuing common shares at just above par value is typically reasonable. The key is whether there were any substantive negotiations or commitments from investors already in place when you incorporated, which might suggest a higher valuation already existed. The 3-month gap before your friends/family round provides decent separation, and startups often see legitimate value creation in those early months that justifies a higher valuation. Just make sure you have documentation of the company's state at incorporation versus 3 months later to show real progress that warranted the increase.

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