For the first time, the IRS has issued an official form to be used for making an election under Section 83(b) of the Internal Revenue Code. Until the IRS issued Form 15620 in late 2024, taxpayers used their own "homemade" forms to make elections under Section 83(b).
What is a Section 83(b) Election?
Under Code Section 83(b), a service provider (whether an employee or independent contractor) can elect to pay taxes on nonvested property transferred in connection with the performance of services. Absent such election, the service provider would normally not recognize taxable income on the value of the property until it vests. The practical goal of a Section 83(b) election is to pay taxes on the property when it has a lower value, thereby minimizing total tax liability.
For example, say a Company grants an employee restricted stock that vests 100% in three years. The employee would generally not recognize taxable income on the value of the stock unless and until it vests three years later. However, the employee can make a Section 83(b) election to instead recognize income in the year of grant, using the current value of the stock.
Taxpayers may still use their own form of Section 83(b) election, although presumably more and more will opt to use Form 15620 over time.
How Does a Taxpayer Submit Form 15620?
Form 15620 and its instructions can be found here. The form must be submitted in hard copy via mail within 30 days following the grant of the restricted property.
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