February 17, 2023
As a startup founder, it’s important to be aware of the various tax implications that come with owning and buying stock in your company. One such consideration is the 83(b) election, which allows you to set the value of your stock at the fair market value on the date it’s granted, rather than the market value on the date that the stock vests. This locks in your lower tax basis and can save you a significant amount of money in the long run.
However, filing an 83(b) election is not always straightforward, and many founders forget to submit the necessary paperwork to the IRS. This can have serious tax implications down the line, potentially resulting in a big tax bill or other headaches.
Fortunately, there’s good news for startup founders who use Carta, one of the best capitalization table software platforms available. Carta has recently introduced a new feature that makes it much easier to file your 83(b) election. With the new feature, you can generate the 83(b) notification through the platform, print the notification and a cover letter, and track the status of your election through the Carta portal. This means you no longer have to worry about physically mailing the letter to the IRS or losing track of its status.
Of course, it’s still important to remember that you need to physically mail the 83(b) election form to the IRS, and it’s best to send it certified mail to ensure that it is received and properly processed. You also need to be aware of the tax consequences of making an 83(b) election, both now and in the future. Every founder’s situation is different, so it’s important to consult with a tax professional to determine the best course of action for your individual circumstances.
One of the most significant benefits of using Carta to file your 83(b) election is the peace of mind it provides. By using a trusted platform like Carta, you can be confident that your election has been properly submitted and that you have taken all necessary steps to protect your financial interests.
In addition to simplifying the process of filing your 83(b) election, Carta also allows you to enter the number of shares you plan to exercise. This is important because not every founder wants to exercise their options on all of their shares right away, since that can result in a tax bill. With Carta, you can enter the number of shares you plan to exercise and ensure that you are only paying taxes on the shares you actually intend to buy.
In conclusion, if you’re a startup founder, it’s important to be aware of the tax implications of owning and buying stock in your company. Filing an 83(b) election can be a complex process, but with Carta, it’s now much easier to take this important step. By using a trusted platform like Carta to generate your 83(b) notification, track the status of your election, and enter the number of shares you plan to exercise, you can have peace of mind knowing that you’ve taken all necessary steps to protect your financial interests. Just remember to consult with a tax professional to determine the best course of action for your individual circumstances.
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