How to Make an 83(b) Election: A Tax Strategy Guide
Can you make an 83b election on non qualified stock options?
An 83(b) election is an irrevocable election made by an employee to be taxed on the fair market value of restricted stock at the time of grant, rather than when the restrictions lapse. The election is made on Form 83(b) and filed with the IRS within 30 days of the stock grant.
If you have non-qualified stock options (NQSOs), you cannot make an 83(b) election. NQSOs are options that are not incentive stock options (ISOs) and do not meet the requirements to be qualified options. 83(b) elections can only be made on restricted stock, which is stock that is subject to forfeiture or resale restrictions.
How long do you have to file an 83 B? If you are an employee who has been granted stock options, you must file an IRS Form 83(b) within 30 days of the date you exercise the options and pay the associated taxes. This form is used to report the income from the sale of the stock, as well as to request a reduction in your taxes due to the special treatment of stock options. Can an independent contractor make an 83b election? Yes, an independent contractor can make an 83b election. This election allows them to pay taxes on the value of their services at the time they are performed, rather than when they are paid for. This can be beneficial if the value of the services increases over time. Can 83b be filed electronically? The answer to this question is unfortunately no. The IRS requires that taxpayers file Form 83(b) via mail in order to receive confirmation of receipt. This is to prevent delays and/or issues with processing the form. What happens if you don't file 83b in 30 days? If you do not file Form 83b within 30 days of the date of grant, you will be subject to income tax on the entire value of the shares at ordinary income tax rates when they vest, regardless of the actual value of the shares at that time.