IRS Proposes Regulations That Would Allow Individuals With §83(B) Elections To E-File Tax Returns

Posting by Jobe Dupre

BACKGROUND: Section 83 of the Internal Revenue Code states that you do not have to recognize income from owning equity in a company until that stock vests.

Section 83(b) refers to a special election you can make with the IRS to let them know that, despite the fact you have not yet vested your stock, you still want to recognize the income associated with ownership immediately.

If you file the 83(b) election before your stock has appreciated from it’s strike price there will be no income and therefore no tax owed. You have 30 days from the date of exercise to get your 83(b) election form to the IRS.

PROPOSED REGULATIONS: In order to remove obstacles to electronically filing individual tax returns, the IRS has issued proposed regulations which would eliminate the requirement that a copy of the §83(b) election be submitted with the taxpayer’s tax return for the year the property is transferred.

This change would apply as of January 1, 2016 and would apply to property transferred on or after that date.

This proposal does not eliminate the requirement to make the §83(b) election no later than 30 days after the date the property was transferred.

We will keep you updated on any events related to this proposed regulation. Please call us at 301-272-6000 if you have any questions regarding this or any other tax matters.

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