The IRS has finally turned on electronic filing for § 83(b) elections. Founders and other service providers purchasing or receiving restricted equity or early exercising options can now complete and submit Form 15620 online through the IRS “mobile-friendly forms” portal, with the usual 30-day deadline unchanged and the obligation to give a copy to the company still in place. As with many tax filings, online submission is preferrable in most cases, although paper filing by mail is still available and may be appropriate in certain situations. You generally only need to file once—either online or by mail, and are not required to do both.
In testing the portal, we’ve identified two immediate practical issues filers (and companies) should plan around:
- A cap on quantity. Each online filing currently accepts a maximum of 999,999 securities per submission. Very large founder grants and early-exercise option exercises can exceed this. If your grant runs over that limit, consider filing by mail on paper Form 15620 (or a compliant letter election) to preserve accuracy and avoid partial filings until the online tool is updated.
- Two-decimal input for per-security values. The online form only allows two decimal places for the fair market value per security and the amount paid per security. This could be a problem for many typical startup early common stock prices (e.g., US$0.0001 per share) and a source of rounding noise in the form’s auto-calculated totals. In our view, where the amounts are not material, rounding in a manner that is most conservative from a tax perspective is the better approach. The election’s legal effect is to include in income the difference between the fair market value and the purchase price of the underlying security as of the transfer date (thus eliminating the need to later include the value of the underlying securities in income as they vest), so if the per security purchase price is a fraction of a cent the total purchase price (or taxable spread) may not be material. Additionally, a filer’s actual cost basis and consideration paid and actual fair market value determinations are evidenced by the grant/purchase documents and other records and should be reflected on the applicable tax return, as well as in the company’s records. (For avoidance of doubt: keep precise calculations and documentation in your files, and if the chosen rounding convention results in a material difference in basis or taxes consider doing a paper filing with the correct fractional purchase price and/or correct fractional fair market value.)
What founders should do now
- File early. The 30-day clock is rigid. Submit electronically or by mail within the 30-day window. Save the IRS confirmation page/PDF and share a copy with your company.
- Use paper if the online constraints distort your facts. If you exceed the quantity limit—or if the two-decimal entry rounding materially misstates your numbers—use paper Form 15620 (or a compliant letter election) and send by a trackable delivery method.
- Coordinate with counsel and payroll. Your company must be able to report any income inclusion correctly and track basis and holding periods. The regulation still requires furnishing a copy to the employer.
Bottom line
E-filing is a welcome modernization that should reduce lost mail and improve recordkeeping. Until the portal catches up with startup math, founders should be mindful of technical limits. If needed, mail the election to keep the filing accurate; if you file online, round conservatively with respect to the per-security figures and fair market value and rely on your deal documents, valuations, and cap table for the true basis, values, and totals.
Reminder: Founders and companies planning a § 83(b) election should contact Sidley’s ECVC team before granting or early-exercising equity. We will (i) confirm timing and mechanics of the election, (ii) help decide whether to e-file or paper file is best for your grant and election, and (iii) help coordinate with the company and/or recipient to lock in documentation and compliance.
Notes and sources: IRS Form 15620 is live and enabled for online submission in the IRS mobile-friendly portal; the 30-day deadline and employer-copy requirements are unchanged under Treas. Reg. § 1.83-2; IRS and practitioner guidance allow filing either online or by mail and retaining proof of timely filing. Reports of the two-decimal online limitation are from practitioner testing.
