Payroll usually doesn’t withhold income and FICA taxes from employees who receive restricted stock until the restriction lapses and the stock vests. Under Section 83(b), however, employees can opt to have taxes withheld currently, long before the restriction lapses.
The IRS has now provided sample language for an 83(b) election, but using the sample is up to you. The IRS has also clarified the tax consequences of 83(b) elections. (Rev. Proc. 2012-29, IRB 2012-28)
Tax me now, please. Employees must file 83(b) elections with the IRS and their employer within 30 days of receiving restricted stock or other property. That triggers your obligation to withhold income and FICA taxes.
Taxes aside, making an 83(b) election isn’t as illogical as it seems.
Employees must still satisfy the terms of the restriction, which apply even after 83(b) elections are made. If they do, and the stock vests, all additional appreciation is taxed at lo...(register to read more)