IRS introduces new form for Section 83(b) elections

What happened?

The IRS on November 7 introduced Form 15620, Section 83(b) Election, for taxpayers to use to make Section 83(b) elections. A taxpayer who receives restricted property (e.g., stock, partnership interest) in connection with the performance of services generally must include compensation income related to the transfer of such property when the right to the property is no longer subject to a substantial risk of forfeiture (i.e., when “vested”) in an amount equal to the fair market value of the property when vested less any amount the taxpayer paid for the property. However, the taxpayer can elect under Section 83(b), not later than 30 days after the unvested property is transferred, to instead include compensation income based on the transfer date of the unvested property. A Section 83(b) election is generally irrevocable, and specific requirements must be satisfied for the election to be valid.

Why is it relevant?

For the first time, the IRS has provided a standardized form that taxpayers can use to make Section 83(b) elections. Form 15620 can be used in lieu of the sample language in Rev. Proc. 2012-29 or requirements in Reg. 1.83-2 that historically have been used to draft the contents of a Section 83(b) election. Although taxpayers are not required to use the new form, it is available for immediate use.

Action to consider

Consistent with the existing Section 83(b) election procedure, a taxpayer opting to make a Section 83(b) election on Form 15620 must mail the new form to the IRS office where the taxpayer files his or her federal income tax return. All other requirements relating to Section 83(b) elections continue to apply, including that an electing taxpayer also should provide a copy to the person for whom the services were provided in connection with the transferred property. The IRS is expected to make electronic filing of Form 15620 available in the future.