If there is one thing a startup founder needs to know about the tax code, it’s the 83(b) election. An 83(b) election essentially allows a founder to recognize income on the stock at the time it is awarded (which generally means zero income) versus at the time the stock vests (which, if things go well, could be a substantial amount of income). Discussion about the 83(b) election comes up quite frequently in startup circles, and most everyone knows that the election must be made within 30 days of the stock purchase date. That said, people often forget to mention that you also need to include the 83(b) in your annual tax filing. I recently completely my personal tax return with my wife, and was ready to e-file, when I got stuck with the question: How do I e-file an 83(b) election?
Can TurboTax e-file an 83(b) election?
I now have the answer, but first a little background: I used Turbotax Home & Business to fill out our taxes this year and did not see any call outs for the 83(b) election. Given that I have zero income to report from the stock purchase (again, this is the point of the election!) I wasn’t too concerned about missing a number in the income section. Rather, I was nervous about e-filing knowing that the 83(b) election was supposed to be included with my return. I was hoping that there was some way to electronically replace the need to include a copy of the election. Yes, I am that lazy.
In the hopes of having to succumb to the worst option of all — printing out our return and mailing it manually (yuck!) – I took to Google. It was comforting to see the auto-complete fill in “efile 83b election” and a number of results pop up from Intuit’s site. Unfortunately, after reading the top five results, I discovered that nobody had a clear answer. Some answers indicated that it is not possible to e-file your return if you need to include the 83(b). Other people seem to know how to e-file an 83(b) election, but are actually using some super version of TurboTax for real tax professionals (…and those of you who bought TT Premier thought you were badasses). It quickly became clear that neither Intuit’s forums or TurboTax-for-regular-people were going to help me.
Yes, I called the IRS
I had no choice but to call the IRS — the week that taxes are due. I actually got someone on the line right away, but I made a critical mistake and ended up waiting about 90 minutes for someone who could help me. When I dialed the number, I should have selected “Complex personal tax questions”. I kept asking about how I could e-file an 83(b) election and they kept redirecting me to someone else. It took talking to three representatives before I figured out that I was simply waiting in the wrong queue.
I should say that the folks answering the phones at the IRS were extremely nice and I ultimately did get a clear answer.
How to e-file an 83(b) election
Drumroll tax nerds, here is the solution:
- Go ahead and e-file your return like you normally would
- Then, snail mail the following to your appropriate tax filing center
- A cover letter with a explanatory statement (see below)
- A copy of your 83(b) election
- A self-addressed, stamped envelope so that the IRS can mail you back confirming receipt
Here is what you need to include in the cover letter, word for word from the agent helping me:
Pursuant to treasury regulations section 1.83-2C per section 83 of the internal revenue code of 1986 as amended, enclosed please find a copy of an election under section 83(b) of the code.
And that’s it. Although this is technically not a way to e-file an 83(b) election itself, it is a way to e-file your entire return while only mailing in two simple documents. I hope this helps!
* Note: I am not a tax professional. Trust me at your own discretion. Better yet, call the IRS 🙂