In late 2024, the Internal Revenue Service (IRS) introduced Form 15620 to provide a standardized mechanism for taxpayers to make elections under Section 83(b) of the Internal Revenue Code (the “Code”). More recently in 2025, the IRS advanced its modernization efforts by updating Form 15620 to permit electronic filing through the IRS’s website. This change greatly simplifies the election process, eases the administrative burden historically associated with manual, time-sensitive filings, and significantly aids recordkeeping. The IRS is encouraging taxpayers to utilize the new electronic filing option to take advantage of its benefits, including immediate confirmation of receipt and secure, retrievable records.
Back to Basics: What Is a Section 83(b) Election and Why Might a Taxpayer Make One?
Pursuant to Code Section 83, when a company awards unvested property (typically stock) to a service provider (such as an employee, director, or advisor) in connection with the performance of services, the service provider generally recognizes taxable compensation income equal to the excess of the fair market value (FMV) of that property over the price paid for such property in the first taxable year in which such property is either transferable or no longer subject to a substantial risk of forfeiture. Code Section 83(b), however, allows the service provider to elect (a “Section 83(b) Election”) to accelerate the date on which the taxable compensation income is recognized.
By making a Section 83(b) Election with respect to a restricted stock grant or purchase (including restricted stock received upon the early exercise of a nonqualified stock option), the amount of taxable compensation income on the stock is limited to the difference, if any, between the FMV of the stock on the grant date or purchase date and any purchase price paid for the stock. This can be beneficial in instances where (i) the purchase price of the stock is equal to the stock’s FMV on the purchase date, or (ii) stock grants are made early in a company’s growth, when the FMV of the stock is exceedingly low, thus locking in (and paying) a low amount of taxable compensation income. By making a Section 83(b) Election, a service provider ensures that any post-purchase or post-grant appreciation in the value of stock that subsequently becomes vested will qualify for capital gains tax treatment upon a subsequent sale. A Section 83(b) Election also carries risk. For example, if the equity is later forfeited, the taxpayer cannot claim a refund for taxes paid on the original election.
While Section 83(b) Elections have long been viewed as a valuable tool in designing equity programs, errors in making the elections are not uncommon and there are limited avenues to correct. A significant number of errors historically were caused by the strict requirement that Section 83(b) Elections must be filed with the IRS within 30 days of the date the stock is first transferred to the service provider. Previously, this filing obligation could only be satisfied by the service provider mailing a hard copy of the executed Section 83(b) Election to the IRS office where the service provider filed its income tax return. In addition, the service provider was also required to provide its company with a copy of the election. There were limited avenues to ensure that the IRS received the form, thus industry practice was to send the election via certified mail, return receipt requested (with the return receipt serving as the only documentation that the IRS received the Section 83(b) Election). Enabling taxpayers to file electronically helps ensure that their Section 83(b) Elections reach the IRS within the required timeframe and provides reliable confirmation that their elections are in fact received.
How Do I File Online?
Taxpayers wishing to utilize the improved Form 15620 will need to sign in or create a new account on the IRS’s ID.me page. Once logged in, taxpayers will be directed to answer a series of questions to complete and either submit the Form 15620 electronically or download it and mail a hard copy of the executed form to the appropriate IRS office. The revised Form 15620 indicates that online filing is preferred, but in any event, taxpayers should only follow one approach. The online form will ask the taxpayer to confirm that the form has not been separately mailed. Once submitted, the taxpayer will receive online confirmation of the submission and may also download/print the filed form to provide to the taxpayer’s employer.
What Has Not Changed?
Despite the recent modernizations of Form 15620 for use in making Section 83(b) Elections, some critical elements remained unchanged:
- Section 83(b) of the Code still mandates a strict 30-day timeline within which the election must be made;
- Late elections are not permitted;
- The taxpayer is still required to provide copies of the Section 83(b) Election to the taxpayer’s employer and/or the issuing company; and
- Taxpayers should continue to retain a copy of the form for their records (although they may now do so electronically).
What’s Next for Employers and Service Providers?
Employers and issuers should:
- Consider updating their equity grant documents, procedures, and notices to inform award recipients of the availability of submitting the Form 15620 online;
- Consider incorporating IRS instructions and links in restricted stock grant notices and early exercise option notices to ease access to the new online system; and
- Reinforce internal procedures for (i) tracking the strict 30-day deadline and (ii) keeping track of filed/submitted Section 83(b) Elections that have been delivered to them by service providers.
Service Providers should:
- Engage a personal tax advisor to advise them of the individual tax consequences that result from a Section 83(b) Election;
- Familiarize themselves with the IRS website and setup any ID.me account in advance of anticipated equity grants, to the extent they want to take advantage of online filing capabilities;
- Begin tracking the 30-day mandatory filing period as soon as a grant is made to ensure timely submission of the Form 15620; and
- Retain a copy of the confirmation of submission and copies of the filed Form 15620 to provide to their employer, as well as for personal tax records.
Next Steps
This modernization of the Section 83(b) election process will mitigate risk and ease administrative compliance for both taxpayers and employers. Nonetheless, both parties must remain vigilant in understanding the tax complexities associated with these types of elections and adhering to the stringent deadlines.
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