an 83(b) election means you pay ordinary income tax on grant date. you should receive a 1099 or a w-2 with the reported amounts. The employee must include the excess of the FMV over consideration paid in the year of transfer and it must be reported on the w-2 box 1 or the 1099 box 7.
- Because the fair market value of the property at the time of receipt might be nominal–meaning, the tax might be insignificant, and an election will avoid a potentially much higher tax bill later. 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.
Section 83(b) allows a taxpayer who receives property in connection with the performance of services that is subject to such restrictions (e.g., nonvested property) to elect to recognize this income at the time of transfer. The principal benefit of a Section 83(b) election is that the taxpayer can lock in appreciation which is generally taxable at capital gains rates upon later disposition.
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