On November 7, 2024, the IRS introduced Form 15620 to standardize the Section 83(b) election process for taxpayers receiving unvested property such as restricted stock. This form replaces the previous requirement for self-prepared election statements and aims to reduce filing errors while simplifying the process for both taxpayers and their advisors. The standardization addresses longstanding concerns about incomplete or incorrect filings that could invalidate elections and result in unexpected tax consequences.
Background and Significance
Section 83(b) allows taxpayers to elect taxation on unvested property at the time of grant rather than at vesting. This election can provide tax advantages when property is expected to appreciate, as it enables taxation at the current, potentially lower value. Form 15620 represents the first standardized format for this election since its inception in the 1970s. The form’s introduction reflects the IRS’s broader initiative to streamline tax filing procedures and reduce common errors that have historically complicated the election process.
The election is particularly relevant for employees receiving equity compensation, such as restricted stock units or other forms of unvested property. By choosing to pay taxes on the current value, taxpayers may realize significant tax savings if the property appreciates substantially before vesting. This strategic decision requires careful consideration of various factors, including future value projections and current tax implications.
Benefits and Advantages
Form 15620 provides several advantages over the previous self-prepared election statements:
- Standardized format reduces filing errors
- Clear guidance on required information
- Simplified preparation process for tax professionals
- Future electronic filing capability
- Consistent documentation for IRS processing
- Reduced risk of election invalidation due to procedural errors
The standardized format helps ensure that all required information is included and properly presented, reducing the risk of technical filing errors that could invalidate the election.
The Filing Process and Critical Timing Requirements
The 30-day filing deadline remains unchanged: taxpayers must submit Form 15620 within 30 days of receiving unvested property. This election is irrevocable, making early consultation with a tax advisor essential. Missing this deadline eliminates the opportunity to make the election for that specific property grant, potentially affecting long-term tax planning strategies. The strict timeline emphasizes the importance of prompt communication with tax advisors when receiving any form of unvested property.
Form 15620 currently requires submission by mail, following existing Section 83(b) filing procedures. The IRS plans to implement electronic filing capabilities exclusively for Form 15620 in the future, though no specific timeline has been announced. When electronic filing becomes available, it will streamline the submission process and provide additional assurance of timely filing. Until then, taxpayers and their advisors should account for mailing time when planning their submissions.
Looking Ahead
The decision to make an 83(b) election remains significant for tax planning. While Form 15620 streamlines the process, the underlying strategic considerations remain unchanged. Taxpayers should maintain close communication with their tax advisors to ensure proper evaluation and execution of this election within their broader tax planning framework. The election’s irrevocable nature underscores the importance of careful analysis and professional guidance before filing.
John Hadwen is a Principal at ARB. He specializes in providing individuals and businesses with comprehensive tax compliance and consulting services related to closely-held business, manufacturing, construction & real estate, and professional services firm taxation. Prior to joining ARB, John was a Tax Principal at a large, regional CPA firm.
