Streamline Your Startup's Tax Filings with Carta's New 83(b) Election Feature

June 22, 2023

Intro: Hello, Startup Founders!

Hey there, startup founders! In the fast-paced startup world, every second count. We know how crucial it is to streamline every process, so you can focus on what truly matters: building your vision. That's why we want to introduce you to a game-changer in equity management: Carta's new automated 83(b) submission feature. Designed with you in mind, this feature aims to make the often tricky process of filing the 83(b) form a walk in the park. If you're an ACH-eligible, US-based user who opts to early-exercise through Carta, this one's for you!

The 83(b) Election: What's the Big Deal?

Before we dive into the new feature, let's take a quick refresher on what an 83(b) election is. It's a provision in the U.S. tax code that lets you, as an employee with equity in a company, change the way your Restricted Stock Units (RSUs) are taxed. Basically, the IRS lets you file an 83(b) election, allowing you to pay taxes on the total fair market value of your equity at the time of the grant, rather than when the stock vests. This could save you a heap of money if the stock's value is expected to skyrocket in the future. But, here's the catch: you have to file the 83(b) election within 30 days of the equity grant.

Carta's Game-Changer: Filing 83(b), the Easy Way

Now, let's talk about the exciting new feature by Carta. Think of it as your personal assistant that takes care of submitting the 83(b) form to the IRS automatically when you exercise your options. The new feature comes with a cleaner, user-friendly interface, so you can navigate through the process with ease.

But, this isn't just about automation. It's about giving you more control and ensuring your information is accurate. With the new feature, you can update your Social Security Number (SSN), digitally sign the 83(b) form, and review your personal information during the exercise request. Plus, you get to access the PDF and the tracking number of your 83(b) form conveniently from the 83(b) Elections tab on the Option Grant modal.

User-Friendly Process: How it Works

So how does this all work? It's pretty straightforward. The option for automated 83(b) submission pops up during an exercise submission. Here, you get to choose between doing it the automated way or the manual way. And don't worry if you initially opt for the manual submission, you can still switch to the automated feature through the Option grant modal, as long as it's within 25 days from the exercise date.

Here's what you need to facilitate the automated 83(b) submission: your Social Security Number (SSN). It's a requirement by the IRS to verify your identity. If you haven't filled in your SSN in the Account settings, you can add and confirm it when choosing your submission method. Once that's done, the automated submission will pull your name, SSN, and address directly from the Account settings. Then, in the Sign and Submit modal, you simply agree to automatically submit the 83(b) form by signing the agreement via digital signature, and voila! The signature is added directly into the PDF of the 83(b) form.

Keeping Track: Status Updates and Visibility

So, you've submitted the 83(b) form. What's next? The 83(b) form PDF and tracking number are displayedin the Option Grant modal on the 83(b) Elections tab. The tracking number, provided by USPS, allows you to follow the progression of your 83(b) submission and verify its status. You'll get updates as soon as your package is delivered to USPS. We recommend printing and storing the online USPS confirmation as this info is only available for a limited time.

The Old School Way: Manual 83(b) Submissions

We get it - some of you might prefer doing things the old-fashioned way. Good news! Carta has enhanced the interface for manual 83(b) submissions as well. During the exercise workflow, you can choose "Submit an 83(b) form later" as your submission method. You can then download and print an 83(b) form from the 83(b) Elections tab on the Option Grant modal. This way, you retain control over your submission process.

When Things Go South: The Role of Legal and Tax Advisors

But what happens when things don't go as planned? Say, your exercise gets stuck or canceled. If you've opted for the automated submission, it would've been initiated immediately after your exercise submission. In such cases, it's crucial to consult with your legal and tax advisors on how to handle your already filed 83(b) election form.

Wrapping Up: The Future of Equity Management is Here

The launch of Carta's automated 83(b) submission feature is a giant leap towards the future of equity management. It simplifies the 83(b) filing process, offering you a streamlined, efficient method to manage your equity. This is a prime example of how technology can make our lives easier. It's about working smarter, not harder. Remember, though, even with such advancements, it's essential to consult with legal and tax advisors in the event of any complications. Each step we take impacts our financial future, making it critical to tread cautiously and wisely. Happy managing, founders!

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