You pay tax when you receive the stock, but not when it vests. You'll also report capital gain or loss when you sell the stock.
he section 83b election makes sense in the following situations:
The amount of income you'll report when you make the election is small and the potential growth in value of the stock is great.
You expect reasonable growth in the value of the stock and the likelihood of a forfeiture is very small.
Don't Miss This Chance: Sometimes an employee pays full value for stock in the company, but has to accept a risk of forfeiture. The way this usually works is the employee agrees to sell the stock back for the amount he paid to buy it if he quits within a specified period. This is a risk of forfeiture even though the employee won't lose his original investment because he can lose part of the value of his stock if employment terminates before a specified date. As a result, the employee will recognize income when the stock vests.
You can avoid this result by making the section 83b election.
And it's free. The election costs nothing because the amount of income you report is the value of the stock minus the amount you paid, and that's zero. Failure to make this free election can be a costly mistake.
Within 30 days after you receive the stock, send the election to the IRS office where you file your return. (Check the instructions to Form 1040 if you're not sure of the address.) We highly recommend sending this election by certified mail and getting a stamped receipt with a legible date.
Provide a copy of the election to your employer (the company that granted the stock)
In the unusual situation where you had your employer transfer the stock to someone other than yourself, you need to provide a copy to that person as well.
Attach a copy of the election when you file your income tax return for that year.
