Questions for 83(b) election tax year and if need to include it

[xiaochong2dai]

Hi guys!
I have two questions regarding to the 83(b) election. The company I work for granted some property to me in 2023. The Form of Section 83(b) Election that I signed says:
The date on which such property was transferred is May 31, 2023. The taxable year to which this election relates is calendar year 2023.

I signed the Form of Section 83(b) Election on June 14, 2023, and sent the originally signed Section 83(b) election to the IRS office by USPS Certified Mail with Return Receipt (within 30 days). IRS mailed back the date-stamped card (and additional 83(b) election form copy I sent) on June 21, 2023. However, In August 2023, I got a letter from IRS and IRS says "We have received your 83 (b) election and applied it to your account for the 2022 tax year".

My questions are:
(1) Shouldn't IRS apply the 83(b) election to my 2023 tax year? The grant happened on May 31, 2023 and the Form of Section 83(b) Election I signed says the tax year for which this election relates is calendar year 2023. Is it because IRS didn’t have my 2023 tax information yet when they send me the letter on August 2023? Should I contact IRS for a correction?
(2) In TurboTax, should I or where should I report the 83(b) related grants? The Form of Section 83(b) Election I signed says "The fair market value at the time of transfer (determined without regard to any restriction other than restrictions which by their terms will never lapse) of the Units is $0.00 per Unit. The amount paid for such property by the taxpayer is $0.00 per Unit." I search TurboTax community and someone says The fair market value of the award should already be included in W-2, box 1, and the IRS no longer requires that we include our 83(b) election form with our taxes when filing. In my case, the FMV is 0 and I didn't pay, so I can't tell if it's included in W-2 box 1 or not.

Thanks a lot in advance!

[AmyC]

1. Yes. The IRS should have marked 2023 since that is what you requested and matches the dates needed. You should try for a correction. it is important to keep all of your paperwork proving your request, the stock dates, etc. It should be a part of your investment notebook anyway.

2. How do I report an 83(b) election on my taxes? is correct that the income should be in your box 1 wages. Contact your payroll company to determine what is included in your box 1 wages. Contact your company regarding the valuation. If the FMV of the stock was zero when received, that is the correct price and nothing would be in wages.

I want to urge you to create a financial notebook that is kept separate from your tax return. Keep it safe and each year, add your year-end statements from all your financial accounts plus a copy of your W2’s, your  carryover information, and proof of your basis in your various investments. You must keep tax records  from the time you purchase until sold/ loss used plus 3 years. It is very easy to lose track of disallowed losses, carryforwards,  and basis.

This can be a digital or paper notebook.

[xiaochong2dai]

Thank you so much for your reply @AmyC! I mailed the supporting docs to IRS, and feel it's better to make my docs match with IRS record, hopefully IRS can correct the 83 (b) application year in my account. Followup question:

I think the FMV being 0 on the 83 (b) election is because of the restriction on transferability (83b election form says may not be transferred) and the forfeiture conditions. So in this case, I don't need to include anything about the grant or 83 (b) related things in my 2023 year tax return right? Also, I don't need to wait for IRS's response for the 83 (b) election application year correction before I file my 2023 tax return?

Thanks again!

[AmyC · Accepted solution]

The award is in your wages so they are being reported. You have filed the paperwork. All is well and you can file. You don't want to wait on the IRS to approve and process before filing. Happy filing!

[xiaochong2dai]

Thanks again @AmyC!