IRC Section 83(b) Election for Restricted Property: New Form 15620, Advantages and Risks of Making the Election

Paying service providers with equity can benefit companies and service providers. Service providers receive an asset that, hopefully, appreciates, while employers can offer a powerful incentive for service providers to remain with the company. Usually, compensation is taxed when received at ordinary income rates. Since restricted property is forfeitable and not transferrable, it is generally not taxed until the restrictions are satisfied or the property becomes transferrable.

An election under IRC Section 83(b) allows a service provider to pay tax on the restricted property received based on its value on the date it is granted rather than the date it is vested. This allows the recipient to pay tax upon a sale of the property at capital gains rates (subject to satisfying certain holding period requirements) rather than ordinary rates on the appreciation that takes place between the grant date and vesting date. The tax savings can be substantial.

The IRS recently released new Form 15620, 83(b) Election. The new form allows taxpayers to file an election without constructing an eligible election that meets Section 83(b) requirements. The form is not yet available to file electronically.

Tax advisers, employers, and service providers of businesses considering or making equity grants need to understand the details of Section 83(b) elections to reap the tax savings.

Listen as our panel of tax, compensation, and benefits experts reviews the nuances of Section 83(b) elections, including the preparation of the new Form 15620.

I. IRC Section 83(b): introduction

II. Eligibility

III. Taxation of restricted property

IV. Company considerations

V. Service provider considerations

VI. S corporation considerations

VII. Profits interests; protective Section 83(b) elections

VIII. New Form 15620, Section 83(b) Elections

IX. Missed elections

X. Examples

The panel will cover these and other critical issues:

• When is it beneficial to file a Section 83(b) election?
• Filing new Form 15620, Section 83(b) Election
• How is the tax calculated when restricted property is granted and a Section 83(b) election is in place? What are the tax consequences upon vesting?
• How is the tax calculated upon vesting of restricted property where a Section 83(b) election is not in place?
• How is a missed Section 83(b) election rectified?

Learning Objectives

After completing this course, you will be able to:

• Determine how stock grants are taxed with a Section 83(b) election
• Ascertain when an election under IRC Section 83(b) could be advantageous for a taxpayer
• Decide how to remedy a missed Section 83(b) election
• Identify the required steps to properly elect taxation under IRC Section 83(b)

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

  
  

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).