The Internal Revenue Code allows individuals who receive restricted stock awards (RSAs) as part of their compensation package to choose when to include the RSA in their gross income. The individual can wait to include the compensation related to the vesting of the RSA in gross income until the year in which the RSA vests or elect under Sec. 83(b) to include the compensation element related to the RSA in their U.S. gross income for the year in which it was received. Making the Sec. 83(b) election and recognizing compensation related to the RSA sooner rather than later, can save the taxpayer from paying ordinary U.S. income and Social Security/Medicare taxes on any appreciation of the RSA from the grant date to the vesting date, and impact the ultimate amounts classified as capital gain or loss upon sale of the stock (including the applicable holding period).

Historically, no IRS prescribed Form has been available for purposes of making the election. In November 2024, IRS released new Form 15620, Section 83(b) Election, which replaces a model letter that taxpayers were required to draft and submit to IRS. The key factors for deciding to make a Sec. 83(b) election are discussed below.

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