4 ms·

What is an 83(b) election? (2008)

60 points by elmar 12y ago

deleted 12y ago
[deleted]
ekanes 12y ago
This is so absolutely critical, and probably the SINGLE highest-leverage thing you'll ever do if your startup is successful. Please if you're starting a company, you must do this.
eli 12y ago
Also this is just generally a good example of why you need a good startup lawyer help you with your documents. Sometimes you can cut corners and make mistakes early in a startup and just fix them later. Failing to make the proper 83b election would be very difficult to fix later.
caniszczyk 12y ago
Here's a much better post on this topic from the folks at Wealthfront: https://blog.wealthfront.com/always-file-your-83b/ https://blog.wealthfront.com/always-file-your-83b/
x13 12y ago
FWIW, here's the address to use IRS FRESNO CA 93888-0002 (that zip4 is important) run this by a pro, it's too important to mess up.
- bretthoerner 12y ago
  Some of us don't live in CA... :) http://www.irs.gov/uac/Where-To-File-Addresses-for-Tax-Professionals http://www.irs.gov/uac/Where-To-File-Addresses-for-Tax-Profe...
  - taylorwc 12y ago
    Your link is a good resource, since not all forms should go to Fresno, but that office is more than just California. For instance, in Kansas and Missouri, 83(b) elections are sent to the Fresno office. The receiving offices are organized by regions.
ChuckMcM 12y ago
As we enter "bubble 2" it is important to also note a problem with 83(b) elections. So if you are hired by a company which gives you a restricted stock grant they may also give you the option to use an 83(b) election to recognize all of that revenue all at once. That lets you get the taxes out of the way and as it vests you just get the stock (no additional tax to pay). The argument is that the value of the stock is going up, so this will save you future taxes (you get taxed at the fair market value when it vests). The challenge is when it goes down. If you elect and it goes down, you don't instantly get a "tax refund" of the difference in value between then and now, instead you can write off the difference against other long term gains (if you have them). If you don't have them, you get to write it off, up to $3000 per year (not even a single dependent!) until you've used it all up. I know this because I was writing off just such a devaluation from stock received pre-crash of 2000, and unlocked post crash of 2000. I didn't use up the entire write off until 2006 when selling some stock with long term gains from my then employer. I say this not to scare you, but to share with you that part of the "entrepreneurial" experience is that you get to visit almost every part of the IRS tax code in some detail, and rarely is it written to make it "easy" for you. Cultivate a relationship with a solid accountant/CPA/tax lawyer before you get to the point of going crazy trying to figure out all this stuff.

60 points by elmar 12y ago

deleted 12y ago

[deleted]

This is so absolutely critical, and probably the SINGLE highest-leverage thing you'll ever do if your startup is successful. Please if you're starting a company, you must do this.

eli 12y ago

Also this is just generally a good example of why you need a good startup lawyer help you with your documents. Sometimes you can cut corners and make mistakes early in a startup and just fix them later. Failing to make the proper 83b election would be very difficult to fix later.

caniszczyk 12y ago

Here's a much better post on this topic from the folks at Wealthfront: https://blog.wealthfront.com/always-file-your-83b/ https://blog.wealthfront.com/always-file-your-83b/

x13 12y ago

FWIW, here's the address to use IRS FRESNO CA 93888-0002 (that zip4 is important) run this by a pro, it's too important to mess up.

bretthoerner 12y ago
Some of us don't live in CA... :) http://www.irs.gov/uac/Where-To-File-Addresses-for-Tax-Professionals http://www.irs.gov/uac/Where-To-File-Addresses-for-Tax-Profe...
- taylorwc 12y ago
  Your link is a good resource, since not all forms should go to Fresno, but that office is more than just California. For instance, in Kansas and Missouri, 83(b) elections are sent to the Fresno office. The receiving offices are organized by regions.

ChuckMcM 12y ago

As we enter "bubble 2" it is important to also note a problem with 83(b) elections. So if you are hired by a company which gives you a restricted stock grant they may also give you the option to use an 83(b) election to recognize all of that revenue all at once. That lets you get the taxes out of the way and as it vests you just get the stock (no additional tax to pay). The argument is that the value of the stock is going up, so this will save you future taxes (you get taxed at the fair market value when it vests). The challenge is when it goes down. If you elect and it goes down, you don't instantly get a "tax refund" of the difference in value between then and now, instead you can write off the difference against other long term gains (if you have them). If you don't have them, you get to write it off, up to $3000 per year (not even a single dependent!) until you've used it all up. I know this because I was writing off just such a devaluation from stock received pre-crash of 2000, and unlocked post crash of 2000. I didn't use up the entire write off until 2006 when selling some stock with long term gains from my then employer. I say this not to scare you, but to share with you that part of the "entrepreneurial" experience is that you get to visit almost every part of the IRS tax code in some detail, and rarely is it written to make it "easy" for you. Cultivate a relationship with a solid accountant/CPA/tax lawyer before you get to the point of going crazy trying to figure out all this stuff.